Insurance Marketplace Realities 2025 – Property

Rate predictions: Property

	Trend	Range
Non-challenged occupancies / Non-CAT		-5% to +5%
Challenged occupancies / CAT exposed		-10% to +10%

Individual accounts may experience greater increases or reductions depending on account-specific metrics

• Extraordinarily tight property market conditions began to ease toward the end of Q4 ’2023, and we are seeing an acceleration in market competitiveness in the first half of ’24 as each renewal month passes.
• Insurers began 2024 reluctant to support a flattening of renewal rates. As the sequential months of ’24 have transpired, insurers have been compelled to readjust their approach to this more competitive market.
• The ’24 property market shift has brought the emergence of a new bifurcation in the market. Insureds that sustained the high levels of rate increase and restrictive terms in 2023 have seen the most competitive renewals in the first half of 2024. Insureds that experienced nominal rate/term adjustments in 2023, especially in the single carrier space, have remained stable in ’24 without the same level of fierce competition.
• The 2024 treaty reinsurance market has largely recovered from the tumultuous market cycle in 2023, where primary insurers were forced to accept substantial increases in reinsurance cost and attachment points along with term restrictions. Due to the changes in terms and pricing, new capital has been drawn into the treaty market in 2024. Substantial increases in available capacity from capital markets through instruments like Insurance Linked Securities (ILS) cat bonds and sidecar arrangements have led the charge. Increased access to reinsurance capital enables the direct insurer market to offer more stable and increased capacity on renewals or new business.
• Due to especially powerful El Niño conditions, the 2023 Atlantic hurricane season resulted in a large drop-off in landfalls along the U.S. East and Gulf Coasts. This lack of a large-magnitude industry event contributed greatly to insurer/reinsurer profitability and subsequent ’2024 rate stabilization.
• As of September 30, the 2024 Atlantic hurricane season has seen only ten named storms, underperforming expectations.
• The Atlantic hurricane season runs until November 30, and a more active second half is anticipated if current conditions shift.
• Hurricane Helene is projected to have caused losses between $3 billion and $6 billion+ in Florida and Georgia, with additional claims expected from windstorm and flooding in the Carolinas and Tennessee.
• A familiar cycle of “what is achievable” on renewals has re-emerged in the property market environment. Traditionally, when the property market shifts to a more favorable condition for buyers, it begins with downward pressure on rates as the first achievable result. True to prior market trends, underwriting discipline has thus far been maintained on the more restrictive terms, coverages and deductibles that were achieved by insurers during the prior year’s hard market.

Insurers remain focused on valuations to demonstrate to their reinsurers that their portfolio data is robust, accurate and balanced when deploying capacity.

• Inflationary pressures on building replacement costs have substantially eased through mid-2024 as evidenced by FM Global and Marshall & Swift average building cost inflation trends showing low single-digit increases. This disinflationary trend is a welcome relief for insureds who are no longer subject to substantial increases in premium on the same risk portfolio due solely to inflation of existing asset valuation.
• The imposition of margin clauses or occurrence limit of liability endorsements (OLLE) is reserved for accounts with obvious and drastic underreporting as we have seen a shift toward only adverse accounts being impacted.
• Appraisals and other back-up data to confirm the accuracy of the insureds statement of values provide insurers with more confidence regarding value accuracy and a greater comfort level in assessing risk.
• To that end, while replacement cost valuation increases seem to be stabilizing, proper asset valuation will remain an important issue and should be viewed as an annual risk assessment.

Catastrophe risk: The new normal is real

• As stated previously in our Insurance Marketplace Realities reports, the definition of natural catastrophe risk continues to be broadened from the traditional perils of earthquake, flood and windstorm in high hazard zones; a heightened concern from underwriters incorporates such secondary perils as severe convective storms, wildfires and freeze into the new definition.
• A total of 22 $1 billion+ losses have hit the U.S. insurance market so far in 2024. Of these losses most (16) were due to secondary perils such as severe convective storms. These losses continue be to of great concern because they are primarily absorbed by direct insurers impacting profitability due to increases in reinsurance treaty retentions.
• The first half of 2024 was the second costliest on record for insured losses from severe thunderstorms at $42 billion globally; 87% higher than the 10-year average. Severe thunderstorms, mainly in the U.S., accounted for 70% of insured losses globally. This follows ~$60 billion in severe convective storm losses in the U.S. in 2023.
• The occurrence of a significant catastrophe (CAT) event with insured losses exceeding $40 billion to $60+ billion will have a profound impact on market predictions and dynamics. Such a major event is likely to prompt a shift in underwriting practices, reinsurance availability, and pricing across the industry.

U.S. 2024 billion-dollar weather and climate disasters

This map denotes the approximate location for each of the 20 separate billion-dollar weather and climate disasters that impacted the United States through August 2024.
Source: National Centers for Environmental Information

1. Central and Southern tornado outbreak (April 26–28)
2. Central, southern and southeastern tornado outbreak (May 6–9)
3. Central tornado outbreak and eastern severe weather (April 1–3)
4. Central tornado outbreak (May 25–26)
5. Southern tornado outbreak and east coast storm (January 8–10)
6. Colorado hail storms and southern severe weather (May 31–June 1)
7. Texas hail storms (April 27–28)
8. Central and Northeastern severe weather (June 24–26)
9. Central, southern and eastern severe weather (May 18–22)
10. Central and eastern severe weather (February 27–28)
11. Central and eastern severe weather (June 12–14)
12. Central and eastern severe weather (March 12 -14)
13. Southern and eastern severe weather (April 8–11)
14. Southern severe weather (May 11–13)
15. Southern derecho (May 15–16)
16. Southern severe weather (February 10–12)
17. New Mexico wildfires (June–July)
18. Central, southern and northeastern winter storm and cold wave (January 14–17)
19. Hurricane Beryl (July 8–9)
20. Northwest winter storm (January 12–14)

In 2024 (as of September 30), there have been 22 confirmed weather/climate disasters with losses exceeding $1 billion each to affect the U.S. These events included 16 severe storms, three tropical cyclones, one wildfire and two winter storms.

The property market appears poised to move from stabilization to a softening phase in the second half of 2024 as capacity continues to come back into the market. This market shift will be evident during the renewal process and program delivery results.

• Losses from Hurricane Helene are not anticipated to trigger catastrophe (CAT) reinsurance treaties or significantly impact primary insurers within the large commercial property sector. The considerable damage extending far inland from coastal counties will continue to heighten insurers' concerns regarding secondary perils, such as windstorm and flooding. Despite these challenges, the property market is expected to continue its competitive trajectory.
• Many insurers are focused on expanding premium writings by aggressively pursuing new business and offering expanded lines on renewals. However, the overall risk profile of each individual insured remains crucial in determining renewal results, considering factors like catastrophe (CAT) footprint, loss history, capacity required and risk occupancies.
• Oversubscribing individual layers during the marketing process is key to leveraging incumbents and new markets to offer more aggressive pricing to secure renewal orders.
• Alternative risk transfer options continue to be in high demand, especially for clients with challenging risk profiles, poor loss experience and/or significant ROL in program structures.
• Annual or multiyear, parametric and structured solutions will continue to be the most traded ART products in 2024. The addition of these products helps address insurance gaps, disintermediate traditional placements, create diversification and help control volatility in the commercial market.
• Clients continue to evaluate program changes, such as increasing deductibles, self-insurance participation, policy limit and catastrophe limits purchased. Insureds taking this approach seek to further align their risk purchasing strategies rather than responding to marketplace restrictions.