Cat exposed property to see the biggest rate gains in 2024: WTW
Catastrophe exposed commercial property insurance renewals are expected to see some of the biggest rate gains in 2024, as pressure continues and a challenged reinsurance market drives buyers towards alternative solutions, to offset rising rates.
An outlook to 2024 for the commercial insurance market from broker WTW paints a fairly bleak picture for those with property in regions where natural catastrophes and severe weather are prevalent.
For 2024, WTW forecasts that catastrophe exposed property insurance rates will rise between +10% and +25%.
Only political risk, terrorism and violence related insurance premiums are expected to rise faster next year.
The property market remains “relatively hard” WTW says, but all over commercial insurance the inflation we’ve seen is continuing to make itself felt in terms of rising prices.
“Certain clients and industry sectors still face spiraling premiums at renewal,” WTW explained.
Going on to highlight the use of alternative solutions and alternative capital in helping clients navigate the challenging environment, saying that these “creative, alternative solutions include risk transfer via parametric options, integrated solutions, and alternative capital/MGA/MGU solutions.”
Price increases have begun to stabilise, WTW explained. The broker said that, after last year’s hurricane Ian, “reinsurers have found themselves on shaky ground,” which led to the imposition of “all-encompassing cuts to capacity, resulting in substantial price increases and larger retentions for retail insurers.”
Retail insurers then had to prune their capacity and portfolios, leading to challenging conditions for insurance buyers.
“These conditions have persisted throughout 2023, culminating in over $100 billion of insured property losses, despite a relatively calm Atlantic hurricane season,” WTW explained. But added that, “A bright spot lies in the restructuring of reinsurance treaty retentions, positioning the capital base for meaningful returns. For consumers, this could attract additional capital to the property insurance marketplace, potentially reducing property insurance prices and mitigating market challenges in 2024.”
Non-catastrophe exposed property is expected to see renewal rates of flat to +10% in 2024, meaning the majority of commercial insurance buyers can expect to pay more for their cover next year.
Jon Drummond, Head of Broking, North America, WTW, said, “As the reinsurance market continues to exert its influence over retail insurers and capital distribution, our clients may face more uncertainty in 2024 across both property and casualty product lines.
“The concept of a bifurcated market has become seemingly omnipresent, but this dynamic may grow to be even more prevalent across multiple lines of business and industries in the foreseeable future.”
Of course, this all reads across to reinsurance markets as well, both in terms of opportunity for capital to cascade in to support the commercial insurance market, as well as in maintaining the upwards pressure, or at least support, for hard market pricing when it comes to property catastrophe risks.
