The year 2024 was one of insurance market transition following a prolonged period of widespread price increases and underwriting discipline in wide segments of the market. The past year saw a marked shift toward buyer-friendly conditions, with insurers growing steadily more confident and focused on targeted growth, according to Aon’s ‘Q4 2024: Global Insurance Market Insights Report’, released last month.
Despite another active year for Nat CAT losses, conditions in the property market continued to ease in the final quarter of 2024, with increasing capacity and underwriting flexibility for well-performing, preferred risk types. The softening of the cyber insurance market accelerated during the year. The well-capitalised directors and officers market saw buyer-friendly conditions prevail, although price reductions have decelerated and, in some cases, levelled off in recent quarters, as some insurers began to focus on sustained underwriting profitability.
Fuelled by higher treaty attachments that kept most Nat CAT losses from impacting reinsurers, abundant capacity and competition, reinsurance market renewals for the 1 January 2025 season were broadly favourable. This, combined with insurer growth ambitions, furthers optimism that moderate-to-favourable conditions will continue in 2025 across most categories of the market.
While the outlook is broadly positive, the insurance market no longer moves only in broad cycles but rather moves increasingly in micro cycles that are more product, industry and geography specific. These micro markets are at different stages of their respective cycles.
Current easing market conditions could swiftly change a micro market as loss data and other external factors become more quickly available and absorbed into the underwriting ecosphere.
The report said, “As we begin 2025, we are carefully watching for further developments related to Nat CAT-exposed property risks – particularly in the immediate aftermath of the California wildfires which are estimated, at the time of writing, to have damaged or destroyed more than 12,000 residential and commercial structures – as well as in the US Casualty market.” This, the report said, pointing out to challenges, including the increasing volatility of climate-related damages as the cost of Nat CAT insured losses in 2024 exceeded $100bn for the fifth consecutive year. Extreme weather events remained a major challenge for the insurance industry, insureds and governments, who are increasingly bearing the burden of such events. Adverse litigation trends and social inflation continue to affect the market. While parts of the casualty market are beginning to soften, “nuclear verdicts”, litigation funding and aggressive plaintiff bar tactics continue to drive adverse loss trends for risks with US exposure.
The report said that insureds and insurers must contend with geopolitical and economic headwinds, ever-evolving cyber threats, the impact of AI and growing corporate responsibility risks.
It said that today’s dynamic environment offers opportunities for clients to deepen their key relationships with insurers while securing risk transfer and alternative solutions that better meet their needs. With easing market conditions expected, the time is opportune to consider strategic investments in long-term risk management and risk-financing strategies using data and insights to sharpen decision-making. M