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Global reinsurer Swiss Re predicts hard insurance market conditions will begin to ease in 2025.
During the current hard market cycle, insurance carriers have charged higher premiums, restricted coverage terms, and pulled coverage for specific lines of business and geographic areas.
“Global inflation pressures have driven premium rates higher, as insurers seek to offset rising claims costs, especially in property and motor lines,” Swiss Re writes in its latest sigma report. “We expect hard market conditions to continue this year but to ease heading into 2025 as claims inflation softens.”
Swiss Re noted that due to property and auto lines, rate increases in personal lines will outpace those in commercial lines in 2024.
Macro Trends: After nearly five years of hard market conditions, prices in commercial lines insurance are moderating. According to the report, global commercial insurance rates improved by just 1% on average in Q1 2024.
Additionally, the macroeconomic environment has become increasingly favorable for insurers. In turn, Swiss Re predicts “material” improvement in underwriting results, with the combined ratio expected to drop below 100%. The combined ratio measures insurance company profitability, according to Investopedia.
Yes, but: Pressures remain for both insurance industry and buyers. For the industry, “potential new inflation shocks” may emerge.
“For example, geopolitical conflicts that disrupt global supply chains can rekindle claims inflation,” Swiss Re warned. “In addition, social inflation has been a key concern for liability insurers in the US since 2015. Of late, there have been signs of social inflation in Australia also.”
For insurance buyers, affordability remains an issue as incomes in some regions have not kept up with premium rate increases.
What we’re watching: If hard market conditions do begin to ease, buyers should expect stabilized premiums, even some reduction. We’d also expect to see additional capacity.
The macroeconomic backdrop is critical in shaping the insurance market. While Swiss Re sees positive trends, things can shift quickly.
