Report: U.S. P&C market is stabilizing
Premiums across all lines increased an average of 5.2% in the second quarter of 2024.
The U.S. property and casualty market has begun to stabilize, says the latest market update report from Alera Group. In Q1 2024, premium increases averaged 7.7% across all lines and account sizes, but that dropped to a 5.2% average increase in the second quarter.
While this is positive overall, there are certain lines facing harder markets than others. Below, we’ll examine the outlook for specific lines, according to Alera’s report.
Commercial auto
Outlook: Deteriorating
Alera reports that commercial auto market conditions are hardening, with rates expected to continue increasing through the rest of the year. At the end of Q2 2024, commercial auto saw an average rate increase of 9%, with premiums projected to rise somewhere between 7% and 10% in the second half of the year.
These rising costs can be attributed to significant commercial auto losses, which have been affected by things like nuclear verdicts, high vehicle repair costs and a shortage of experienced truck drivers. Alera advises insurers should expect some reductions in commercial auto capacity going forward, especially in Texas, Florida and California, as well as tougher underwriting scrutiny and tighter policy restrictions.
Commercial property
Outlook: Improving
As conditions improve in commercial property lines, Alera reports buyers are seeing more moderate price increases, better placement terms and increased capacity in some areas. Premium increases averaged 8.9% in Q2, compared to 10.1% in Q1, with some businesses in areas not prone to catastrophes seeing no increase at all. In turn, those running high-risk organizations, like those with weak risk management or those located in a disaster-prone areas, will continue to experience double-digit rate increases, limited coverage availability and more restrictions.
Commercial property losses in Q1 were $17 billion – largely driven by secondary perils like severe convective storms, flooding and winter weather. In response to the increase in secondary peril losses, Alera reports that parametric insurance measures are becoming more popular, with submissions up 500% over 2023.
Cyber liability
Outlook: Improving
Alera reports that “ample capacity and the desire for growth” are fueling competition in the cyber liability sector, which is helping to keep rates down despite cyberattacks being up 18% from 2023. At the end of Q2, rates were reportedly down 1.7%, which marks the first price decrease in this line since 2018. Some of the more challenging industries when it comes to cyber liability are manufacturing, healthcare, schools, utilities and law firms.
Overall, underwriting restrictions are easing, creating increased room for insureds to negotiate higher sublimits for coverages for ransomware and fraudulent fund transfers.
Directors & officers
Outlook: Improving
D&O rates have trended downward for the past seven quarters, Alera reports, with that trend expected to continue through 2024. At the end of Q2, rates for this line were down an average of 1%. However, riskier businesses like healthcare, education, cannabis-related businesses, banking, biopharmaceuticals and nonprofits that serve children and other vulnerable populations, are seeing D&O rate increases.
New carriers and slowing demand have allowed for more D&O capacity, though Fitch Rating predicts that these current market conditions may be unsustainable long-term considering underwriting results from the last several years.
General liability
Outlook: Stable
According to Alera’s report, there are no signs of significant changes in capacity, availability or underwriting parameters when it comes to general liability. The average rate increase at the end of Q2 was 5.1%, with the year-to-date average increase at 5.2%, though higher-risk businesses are likely seeing higher increases.
Claims prices are being driven by things like medical costs, nuclear verdicts and increasing litigation expenses, with loss trends outpacing rates. This has put pressure on insurers to be selective with their expansion in this area. The report also notes there has been a reduction in capacity for things like sexual abuse and molestation coverage.
Personal lines
Outlook: Improving
The personal lines market is finally beginning to stabilize, though hard market conditions and rate increases are projected to continue through 2024. To restore profitability, Alera reports, insurers are “prioritizing profit over growth” and becoming more selective about the business they write.
Personal auto results are improving, with capacity, availability and underwriting requirements remaining stable in most cases. Alera predicts auto rate increases will moderate in the second half of the year, though drivers in some areas (like California) could see rate hikes of 20% or higher if approved.
Homeowners rate increases have been between 5% and 15%, with companies pushing for higher minimum deductibles and are strict about adhering to underwriting guidelines. Availability is still a challenge in catastrophe-prone areas, and underinsured homes remain an overall issue.
Other lines Alera Group’s report predicts will remain “stable” this year include employment practices liability, environmental, general liability, medical malpractice, professional liability, surety, umbrella/excess liability and workers’ compensation.