Commercial property insurance, after facing significant challenges in the previous year, is showing signs of stabilization and better capitalization in 2024, according to USI Insurance Services’ latest Commercial Property & Casualty Market Outlook Mid-Year Addendum.
USI, a New York-based insurance brokerage firm, stated in its report that the large rate increases experienced in 2023 have largely subsided for the broader market. Rates for both natural catastrophe (CAT) and non-CAT property are either flat or have increased by up to 10%, particularly for risks with minimal loss history and good risk quality.
The widespread double- or triple-digit rate increases observed in 2023 have diminished, with most renewals experiencing single-digit increases. Some shared or layered placements have even seen rate decreases due to the replacement of costly capacity from the previous year.
USI identified several trends to watch in the commercial property insurance market for the second half of 2024, including stabilization in the reinsurance market, expanded capacity on shared and layered programs, intensifying wildfire concerns, and updated catastrophe models that could impact insurer appetite or pricing.
The report highlighted the anticipation within the insurance industry regarding potential pricing and capacity impacts following new releases from Moody’s RMS and Verisk, particularly concerning updates to hurricane models for the U.S. Verisk is expected to release an additional update to its Wildfire model in the near future.
According to USI, the new hurricane models are likely to have the most significant impact on the Gulf Coast and Southeast regions, with average modeled losses expected to increase by 5% to 10%, and up to 20% to 30% for certain portfolios. Insurers, reinsurers, and state regulators are actively testing their current versions against the updated hurricane models to assess portfolio impact, potential pricing adjustments, additional surplus required, and capacity needs.
The report also noted a continued interest in captive insurance, with the total number of captives worldwide increasing from 5,879 in 2020 to 6,181 in 2023, primarily driven by property insurance market conditions.
In the commercial 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 highlighted as emerging trends to monitor in the coming months.
Regarding general liability (GL) and products market, USI described it as still challenging, with more flat renewals observed in some industry segments. Real estate and habitational risks remain difficult to place, with insurers typically increasing rates from high single digits to low double digits.
Furthermore, the report highlighted that litigation is prompting a reassessment of approaches to per- and polyfluoroalkyl substances (PFAS) underwriting, coverage, risk management, and claim handling. Insurers are increasingly mandating exclusions on all renewal accounts, particularly for industries like manufacturing, hospitality, retail, and real estate. USI anticipates that obtaining PFAS coverage in the environmental insurance marketplace will become more challenging for product exposure, including supply chain/distribution risks and site-specific risks.
