Geopolitical and economic risks are worrying Marsh McLennan’s clients as the broker sees rising costs for risks from catastrophes, social inflation and reinsurance, said its chief executive officer.
For the year ahead, the group sees a complex risk environment including recession risk for major economies, but moderating inflation and the possibility of easing interest rates make a soft landing more likely, John Q. Doyle, president and chief executive officer, said in a conference call.
Multiple wars, escalating conflict in the Middle East and rising tension in the South China Sea are all raising geopolitical risks, he said.
Doyle noted geopolitical and other risks are a concern for MMC’s clients and having just returned from the World Economic Forum, he said the launch of the Unity grain shipment facility in Ukraine with the broker’s help is an example.
Marsh McLennan earlier announced a public private-partnership with Ukraine’s government, banks and insurers to provide insurance for Black Sea grain exports with coverage from Lloyd’s underwriters.
“Unity is now providing access to affordable war risk insurance for grain shipments in the Black Sea,” Doyle said. “The Ukrainian government’s ambition is for the facility to enable nearly 1,000 shipments annually, helping to support their economy and global food security.”
The group’s Marsh, Guy Carpenter and Oliver Wyman segments all worked on the insurance solution through a public-private partnership.
Nominal gross domestic product expectations remain healthy for major markets, he said. While inflation has moderated, it is still elevated, and tight labor markets and supply chain challenges persist.
Continued low unemployment and sustained payroll growth support demand in health and benefits markets and exposure unit growth in workers’ compensation, he said.
The cost of risk continues to increase as insurers calculate rising catastrophe, social inflation and reinsurance costs, Doyle said.
Health care costs driven by prescription drugs rose in 2023 and are expected to remain elevated, he said.
Looking at insurance market conditions, Doyle said primary insurance rates rose for the 25th-consecutive quarter. Property rates rose 6% and casualty rates were up in the low single digits, he said.
Workers’ compensation rates fell slightly. Financial and professional liability rates fell by the low single digits, according to Doyle. Cyber pricing fell modestly after several years of increases.
In reinsurance, Jan. 1 renewals reflected a more balanced environment than the previous year. Doyle said underwriting discipline continued “but the market was more responsive to client objectives.”
Capacity was adequate and there was increased client demand, he said.
Reinsurance rates rose modestly for property catastrophe programs without losses while loss-hit programs saw rates rise between 10% and 30%, Doyle said.
Casualty programs faced more scrutiny with pressure on pro rate ceding commissions and excess of loss pricing, he said.
Marsh McLennan nearly doubled its fourth-quarter net income on double-digit revenue growth in both the risk and insurance services and consulting segments.
Fourth-quarter net income attributable to the company rose to $756 million from $466 million. Revenue rose to $5.55 billion from $5.02 billion. In 2023, net income attributable to the company rose to $ 3.76 billion from $3.05 billion.
The group invested $1.6 billion in acquisitions last year, its biggest year for acquisitions in nearly two decades aside from 2019, when it acquired JLT, Doyle said. The group made two recent acquisitions in Australia and one in the U.S. mid-Atlantic area. It also closed on two administration sales in the Mercer consulting segment on Jan. 1, he said.
Marsh McLennan is the largest insurance broker with 2022 total revenue of $20.70 billion, according to Best’s Review’s annual Top 20 brokers ranking.