According to USI Insurance Services, following on from last year’s challenging property insurance market, 2024 is proving to be a “more stable and capitalized market.”
In their latest Commercial Property & Casualty Market Outlook Mid-Year Addendum, USI notes that the widespread double- or triple-digit rate increases that were seen in 2023 have largely subsided for the broader market.
“Most renewals have seen single-digit increases, with some shared or layered placements seeing rate decreases due to the replacement of more expensive capacity from 2023,” the firm explained.
Moreover, the insurance brokerage named reinsurance market stabilisation, expanded capacity on shared and layered programs, intensifying wildfire woes, as well as updated catastrophe models that may impact insurer appetite or pricing as key trends to watch in the second half of 2024.
On the reinsurance side, USI explained that as reinsurers look to maximize returns while the rates are elevated, “we will continue to see more capacity deployed by incumbent insurers, prospective insurers, managing general agents, programs or facilities.”
Moving towards the catastrophe model point, the insurance industry is awaiting potential pricing and capacity impacts following new releases from Moody’s RMS and Verisk, the report reads.
Both platforms included updates to the hurricane models for the U.S.
In addition, Verisk is scheduled to release an additional update to its Wildfire model this month.
The report reads: “The areas expected to be most impacted by the new hurricane models include the Gulf Coast and the Southeast, with average modeled losses expected to increase anywhere from 5% to 10%, and as high as 20% to 30% for certain portfolios. Insurers, reinsurers and state regulators are testing their current versions against the updated hurricane models to determine portfolio impact, potential pricing adjustments, additional surplus required and capacity needs.”
However, as the industry begins to implement these models across their portfolios, insureds with exposures in these areas should anticipate for some pricing fluctuations, especially in heavily concentrated coastal areas from Texas through North Carolina, USI explained.
Meanwhile, USI also noted that captive interest continues, with the total number of captives worldwide increasing from 5,879 in 2020 to 6,181 in 2023.
The insurance brokerage explained that the uptick was driven mostly by property insurance market conditions.
“Despite the interest in retaining more risk, not all insureds are able due to third-party requirements such as lender
agreements, lease requirements, cost of collateral or the cost of fronting arrangements. Newly formed captives will be more susceptible to scrutiny and higher collateral requirements. Those with established captives and adequate surplus to take retentions excess of $5M will see the greatest impact,” USI said.
Shifting attention now towards casualty, USI explained that the rate and pricing environment for workers compensation remains competitive in most states, with mental injury claims and catastrophic injuries being listed as trends to watch in the next six months.
“Broadening the criteria for compensable mental injury claims may lead to an increase in their frequency, severity and adjustments in WC insurance premiums overall,” the report reads.
However, USI notes that insurers are closely monitoring this area and could adapt their underwriting if catastrophic injuries increase.