‘Excessive litigation’ in US driving up liability rates: Marsh McLennan CEO

Excessive litigation in the U.S. is driving a surge in liability insurance rates, the top executive at Marsh & McLennan Cos. Inc. said Thursday as the brokerage reported higher revenue and profit in the second quarter despite economic headwinds.

Overall commercial insurance rates continued to soften in the quarter, driven by property, but U.S. excess casualty rates jumped 18%, according to Marsh LLC’s global rate index.

“Excessive litigation and the abuse of our legal system are effectively imposing a tax on our economy and causing a surge in U.S. liability insurance costs,” Marsh McLennan President and CEO John Doyle said during an earnings call with analysts Thursday morning.

“Escalating costs will only make it harder for companies to decide to invest and grow here, and for those that do, they will ultimately have to pass along these increased costs to consumers,” Mr. Doyle said.

Marsh McLennan reported $6.97 billion in revenue for the quarter, up 12% from the same period last year.

Revenue increased 4% on an underlying basis, which excludes the impact of acquisitions and dispositions and foreign currency exchange fluctuations.

Results were “solid,” reflecting continued momentum in the business and an active year of acquisitions, Mr. Doyle said.

“I was pleased with our execution, especially given the impact of lower fiduciary interest income, declining property and casualty pricing, and market uncertainty affecting our clients, especially here in the U.S.,” he said.

Marsh McLennan continues to expect mid-single-digit revenue growth and margin expansion for the year.

Second-quarter net income rose to $1.2 billion, up 8% on the prior-year period.

Marsh LLC, Marsh McLennan’s main brokerage arm, reported revenue of $3.8 billion, an 18% increase overall and up 5% on an underlying basis.

Guy Carpenter & Co. LLC, the reinsurance brokerage arm, reported $677 million in revenue, a 7% increase overall and 5% on an underlying basis.

In the large-account segment, some businesses are deferring project work, Mr. Doyle told analysts. “We’re seeing a slowdown in construction activity, M&A activity, IPOs. Hiring is obviously slow,” he said.

In its consulting business, Mercer reported $1.5 billion in revenue, a 9% increase, and Oliver Wyman reported revenue of $873 million, a 5% increase.

Marsh’s global rate index declined 4% in the quarter, compared with a 3% decline in the first quarter. U.S. rates were flat overall.

Global property rates declined 7% in the quarter, compared with a 6% decline in the first quarter, despite a surge in first-half catastrophe losses.

Global casualty rates increased 4% and workers compensation rates declined 4%. Global financial and professional liability rates were down 4%, while cyber rates declined 7%.

In reinsurance, midyear renewal rates declined 5% to 15% for non-loss-impacted programs. “A moderate increase in client demand was offset by reinsurers increasing capacity,” Mr. Doyle said.