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Marsh McLennan reports revenue growth; sees rate hikes ahead

John Q. Doyle

Reinsurance and primary commercial property insurance buyers will likely see significant rate hikes at upcoming renewals, executives at Marsh & McLennan Cos. Inc. said Thursday while discussing the company’s third-quarter results.

Losses from Hurricane Ian will lead to substantial increases in property catastrophe reinsurance rates, which were already expected to rise more than 20% at year-end, as well as property insurance rates, they said on the call with analysts.

Rates on other lines continue to increase, too, including a sharp rise in cyber liability rates, they said.

The world’s largest brokerage reported $4.77 billion in revenue for the quarter, a 4% increase over the same period last year and an 8% rise on an underlying or organic basis, which excludes the effect of mergers and acquisitions and foreign exchange fluctuations.

Net income edged up 1.7% to $546 million.

Marsh LLC, its main brokerage arm, reported $2.47 billion in revenue, a 5% increase over the same period in 2021, largely reflecting the effect of foreign exchange changes, which saw the dollar rise against several currencies, including the British pound and the euro. Revenue was up 8% on an underlying basis.

Marsh’s business in the U.S. and Canada reported $1.45 billion in revenue, up 6.2% overall and 5% on an underlying basis. Its Europe, Middle East and Africa business reported $589 million in revenue, a 1.8% decrease overall but a 9% increase on an underlying basis, reflecting foreign exchange changes.

Reinsurance brokerage arm Guy Carpenter & Co. LLC reported $328 million in quarterly revenue, a 4.5% increase over the same period last year and up 7% on an underlying basis.

Looking ahead, John Q. Doyle, group president and chief operating officer of Marsh McLennan, said losses from Hurricane Ian, which hit Florida’s Gulf Coast last month and caused by several estimates more than $50 billion in insured losses, will have a strong influence on the market.

“Ian’s category 4 strength, incredible size and slow pace resulted in tremendous damage, the cost of which is exacerbated by the effects of coastal development, the escalation of property values, general inflation and persistent supply chain challenges,” he said.

Mr. Doyle will take over as CEO and president of the company when Dan Glaser retires at year-end.

Property cat reinsurance buyers will see some of the largest rate hikes, said Dean Klisura, president and CEO of Guy Carpenter.

Prior to Hurricane Ian, property cat losses had exceeded modeled losses for several years, so rates were expected to rise by 20% to 25% or more, he said.

“Now, it’s likely, of course, to be higher than that,” Mr. Klisura said. In addition, reinsurers will be more likely to deploy their capital with cedents where they also cover other lines, such as casualty risks, he said.

Property insurance rates are also expected to rise. Year to date, property rates have risen 6%, said Martin South, president and CEO of Marsh.

“We would have thought by now at this point in the cycle after such consistent growth in property that we'd have started to see some easing off. The reverse is going to be true sadly for our clients,” he said.

Cyber rates are also seeing significant hikes, with rates up 53% in the third quarter. Mr. South said.