P/C market showing signs of stabilization

By Mark Englert

At a glance, the U.S. property/casualty insurance market is showing signs of stabilization. Insurers are seeing meaningful improvements in net income, the average price increase across all lines of coverage and account sizes is down from 7.7% to 5.2%, and the current rate levels are attracting new capital into the market and creating competition.

Lending to growth

According to Alera Group’s 2024 Property and Casualty Market Outlook, the U.S. P/C industry in 2023 recorded its best first-quarter underwriting result in more than 15 years, thanks to a rising stock market, higher interest rates, supply chain improvements, and regulatory relief in states such as Florida and California. These improved results are causing rate increases to moderate, encouraging insurers to offer more capacity.

For commercial property, buyers are getting moderate price increases, increased capacity and better placement terms in many parts of the country. There has also been steady growth in parametric coverage – a type of insurance that covers the likelihood of a loss-causing event. An upfront agreement to make a payment upon the occurrence of a covered event meeting or exceeding a predefined intensity threshold is used instead of the traditional method of compensating the insured for the loss. In fact, submissions for parametric insurance are up 500% over last year.

Personal lines are also seeing stabilization after several years of volatility. Insurers are feeling grounded in their current rates, thanks to a sounder reinsurance market and slowing inflation. Insurers are also prioritizing profit over growth, which means they will likely be stricter in adhering to underwriting guidelines and pickier about what they choose to write.

Continued areas of concern

Although there is a general upward trajectory for the market, Alera Group’s 2024 Property and Casualty Market Update found that casualty lines and property insurance continue to be areas of concern.

Property insurance, in particular, faces an uphill battle as increasing frequency of extreme weather events continues to affect insurer profitability and rates. In 2023 alone, the U.S. suffered 25 confirmed weather-related climate disasters, with losses exceeding $1 billion each. Data from sources such as the National Oceanographic and Atmospheric Administration suggests that the annual average of these events will keep increasing. What also must be considered is that while P/C insurers have worked to adjust their models to better reflect larger catastrophes, the growing number of small and midsized events that follow larger storms will also significantly affect profitability.

It’s also important to note that insurers are exiting some markets. As further evidence of catastrophic weather’s far-reaching impact, some segments of business and areas in the country are simply becoming uninsurable. The risk for insurers is too high, and the reward is too low. Insurers also are pulling out of places where regulation hampers rate adequacy and judges systematically apply laws and court procedures in a manner that works against defendants in civil lawsuits.

Make the most of the P/C market

We are seeing stabilization and even growth in the P/C market; however, capacity, coverage and pricing still pose challenges to certain industries, insurance product lines and parts of the country. It’s important to discuss with your insurer what information is most helpful in positioning your business.

Along with speaking to your insurer, overcoming feelings of complacency will also be key. Insurers are always looking to grow, and if your business has a sound loss history, documents a record of managing risk and is in a desirable industry segment, asking your broker to test the market and evaluate all options for improving your current program could yield positive results.

Additionally, remember that many of the business decisions that teams make today can drive up insurance costs and impact coverage options tomorrow. When engaged early in the process, brokers may be able to offer ideas and solutions that drive decision-making and yield positive outcomes.