Commercial Property Insurance Market Proving More Stable, Capitalized: USI

Following last year’s historically challenging property insurance market, 2024 is proving to be “a more stable and capitalized market,” USI Insurance Services reported in its latest Commercial Property & Casualty Market Outlook Mid-Year Addendum.

“Large rate increases from 2023 have mostly subsided for the broader market,” the New York-based insurance brokerage firm said in the report. “Rates are flat to up 10% for both natural catastrophe (CAT) and non-CAT property with minimal loss history and good risk quality.”

Widespread double- or triple-digit rate increases seen in 2023 have largely subsided for the broader market, USI reported, and 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.”

Commercial Property Insurance Trends

In the report, USI listed reinsurance market stabilization, expanded capacity on shared and layered programs, intensifying wildfire woes and updated catastrophe models that may impact insurer appetite or pricing as trends to watch in the second half of 2024.

On the catastrophe model point specifically, the insurance industry is awaiting potential pricing and capacity impacts following new releases from Moody’s RMS and Verisk, the report said. Both platforms included updates to the hurricane models for the U.S. Verisk is scheduled to release an additional update to its Wildfire model this month.

Related: CIAB: Commercial P/C Premiums Increase 7.7% in Q1 2024

“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,” the report said. “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.”

USI also noted that captive interest continues; the total number of captives worldwide increased from 5,879 in 2020 to 6,181 in 2023. That uptick was driven mostly by property insurance market conditions, USI said.

Commercial Casualty Insurance Trends

In the casualty insurance sphere, USI reported that the rate and pricing environment for workers compensation remains competitive in most states. Mental injury claims and catastrophic injuries were 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 said. USI later added that insurers are “closely monitoring” catastrophic injuries and could adapt their underwriting if they increase.

And, while USI described the GL/products market as “still challenging,” more flat renewals are being seen in some industry segments, the report said. Real estate and habitational risks “continue to be challenging to place, and insurers willing to cover the risks are typically increasing rates from high single digits to low double digits,” USI reported.

Related: US Workers’ Comp Line Still Showing Strong Profits, Lower Claim Frequency

The report also shared that litigation is prompting the reassessment of approaches to per- and polyfluoroalkyl substances (PFAS) underwriting, coverage, risk management and claim handling.

“Most insurers are mandating exclusions on all renewal accounts regardless of industry or exposure to loss, but especially manufacturing, hospitality, retail and owners of real estate,” the report said. Along these lines, USI anticipates that finding PFAS coverage in the environmental insurance marketplace will be more difficult for product exposure, including supply chain/distribution risks and site-specific risks.

Go Deeper

Visit the USI website to read the full report.

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Commercial Lines
Business Insurance
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