Single-digit increases in US commercial market next year, predicts broker

The P&C segments of the US commercial lines market in 2024 will look much like 2023, with single-digit percentage increases, according to Woodruff Sawyer. In its P&C Looking Ahead Guide for 2024, the US broker says inflation and rising reinsurance costs due to severe weather events will continue to impact property insurance costs. “Commercial insurance buyers who remember ten years ago, when rate decreases occurred every year, are likely asking ‘Is this a new normal?’, says Woodruff Sawyer. The answer, it says, depends on three factors. Firstly, inflation: “The combination of decelerating inflation and higher investment portfolio yields will improve insurer results, which should result in more favourable premiums, but that will likely not materialise until later in 2024,” the broker says. Secondly, climate and catastrophic loss, with insurers expected to place greater scrutiny on resilient building materials and construction practices. And thirdly, reinsurance, with reinsurers responding to catastrophic events by increasing premiums, adding more restrictive terms and conditions, and requiring insurers to retain more catastrophic loss. Woodruff Sawyer says that the property market appeared to be stabilising until Hurricane Ian hit in September 2022, followed by winter storm Elliott in December 2022, “which literally blew the roof off the property market, producing an even greater impact on the reinsurance market.” The broker said valuation continues to be a challenge in the property market, as well as “determining the appropriate coverage and premium amid an ever-changing catastrophe landscape. The increase in catastrophic events combined with increases in values and increases in retained risk (via reinsurance retentions increasing) has led to carriers reducing catastrophe limits, increasing deductibles, and charging significantly more premium,” it says, adding: “If we can finish 2023 with no major industry events, we expect a stabilisation of both coverage and rate increases in 2024.” On the casualty side, Woodruff Sawyer said the hard market for primary liability is back, driven by booming litigation activity, “backed by an increasingly aggressive plaintiffs’ bar and deep-pocketed litigation financiers. Our best advice is to leverage workers’ compensation, which continues to be a stable source of insurer profits and a growth target for essentially every casualty market.” Looking at specific sectors, Woodruff Sawyer said that for workers’ compensation it anticipates rate movement of -5% to +1% for 2024. For the commercial auto sector it anticipates modestly higher rate increases of +6% to +9% in 2024. For commercial general liability the broker said to expect rates to increase slightly faster in 2024, “with the greatest pricing impact borne by the toughest risks: manufacturers of tough products (eg kids’ goods, auto or medical parts, and chemicals), habitational real estate owners and operators, sharing economy firms (on-demand delivery services and home sharing), and companies with material wildfire exposure (utilities and forestry concerns). We anticipate rate movement of +3% to +8%.” With the umbrella market for large companies (revenues of $1bn+), the broker expects rates of +7% to +15%, while for small commercial and middle-market firms (less than $1bn), it foresees rates of +4% to +10%. For excess casualty coverage, large companies should expect rates of +4% to +10%, and for small commercial and middle-market firms, rates of +2% to +8%.

Single-digit increases in US commercial market next year, predicts broker

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