Insurance broker WTW predicts that catastrophe-exposed property business will see price increases of between +10% to +25% in 2024 and warns that while commercial lines price increases have started to stabilise, it’s a challenging and uncertain environment for P&C insurers heading into next year.
The inflationary landscape continues to impact commercial insurance prices, with WTW noting that almost all lines of coverage continue to show price rises mostly in the single digits, while the property market remains relatively hard.
WTW warns that at the upcoming renewals, certain clients and industry sectors still face spiralling premiums.
To combat this, WTW says that it has proactively “assisted clients disrupt the status quo by testing and implementing creative solutions to address the challenges faced by clients.”
This includes alternative and innovative solutions such as parametric options, integrated solutions, and alternative capital/MGA/MGU solutions.
“Additional innovative options include risk financing-led structured programs, along with captives, group captives, and rent-a-captive solutions to provide complementary and/or alternative solutions to traditional insurance programs,” says WTW.
However, a positive for buyers is that commercial lines price increases have begun to stabilise.
“Following the aftermath of Hurricane Ian, reinsurers have found themselves on shaky ground. In response, property reinsurers implemented all-encompassing cuts to capacity, resulting in substantial price increases and larger retentions for retail insurers,” says WTW.
“This prompted retail insurers to overhaul their property insurance portfolios, reducing capacity and ushering in a challenging property market for buyers. These conditions have persisted throughout 2023, culminating in over $100 billion of insured property losses, despite a relatively calm Atlantic hurricane season,” adds the broker.
According to WTW, one bright spot is the restructuring of reinsurance treaty retentions, positioning the capital base for meaningful returns. The broker says that for consumers, this could attract more capital to the property insurance sector, which could potentially lower rates and somewhat mitigate the market challenges in 2024.
Looking ahead to next year, WTW notes that casualty reinsurers are considering social inflation and rate adequacy in casualty lines, which follows numerous firms bolstering reserves for this line of business.
“If investment and reinsurance capacity decrease in liability lines, the current moderate rate environment may shift towards harder conditions,” says the firm.
Adding: “Economic uncertainties stemming from global conflicts and a slowing Chinese economy contribute to uncertainty, though the Property and Casualty industry remains well- capitalized, boasting $970 billion in policyholder surplus and increasing investment yields. This capital position may impact buyers positively, driving softer market pricing.”
Another bright spot, according to WTW, is the stability being shown in financial lines, including cyber insurance. The broker finds that the financial lines sector appears resilient, with notable shifts towards a hard market contingent upon major claims or disruptions in the space.
Despite both the challenges and uncertainties, WTW says that the P&C industry does not anticipate material changes in the near term. So, the expectation is that the market will endure the hard property market for as long as possible, while the casualty space might seek rate increases.
In terms of price predictions for 2024, WTW expects property cat-exposed rates to rise by 10% to +25%, and non-cat exposed prices to be flat to +10%.
Within the casualty sector, the firm predicts that general liability prices will rise between 1% to 4%, umbrella prices to rise 2% to 5%, excess rates to be flat to up 4%, workers comp prices movements to be between -3% to -1%, auto rates to be up between 4% and 7%, and International lines prices to be flat.
