Risk Management

More insurance rate hikes coming, but at slower pace

Firm predicts “high single digits” for property, “low single digits” for casualty insurance.
article cover

Nora Carol Photography/Getty Images

4 min read

CFOs should prepare to get out those checkbooks this year. Property/casualty insurance (P/C) industry observers predict 2024 will largely be another year of premium increases, though perhaps not as bad as last year.

“The US [P/C] insurance industry enters 2024 with strong momentum,” experts at global reinsurance giant Swiss Re wrote in a market outlook report. “Profitability was below insurers' cost of capital last year, but strong premium increases, easing claims cost inflation, and higher investment returns began to boost industry results by [the second half]. We expect these trends to continue in 2024, supporting profitability improvement.”

That may be music to insurers’ ears, but what does it mean for buyers? CFOs should expect higher rates in some areas and flat or declining rates in others. Swiss Re experts predicted commercial property rates will increase in the high single digits and commercial liability pricing will grow in the low single digits.

Insurance won’t be letting up on the gas in commercial auto policy renewals, James Auden, a managing director at Fitch Ratings, told CFO Brew. After a lull in commercial auto claims tied to the Covid-19 pandemic, underwriting losses came roaring back in 2022 and the trouble continued in 2023, he said.

Commercial auto “is a line with a long period of pricing increases, and it doesn’t seem to turn things around. That’s where there’s a need for rate [hikes],” Auden said. Experts at insurance broker Willis Tower Watson (WTW) in November predicted 2024 commercial auto rates will increase 4% to 7%.

As for what CFOs can expect from other casualty lines, WTW predicted general liability rate growth of 1% to 4%, umbrella liability rate increases of 4% to 8%, and excess liability rate increases of 2% to 7%.

The good news is that rate increases should decelerate in other lines of business. Companies are likely to still pay more for their policies, but the sting may be less pronounced.

According to the Council of Insurance Agents & Brokers (CIAB), commercial lines pricing grew an average of 8.1% year over year in the third quarter. (CIAB hasn’t yet published Q4 survey data.) While Q3 marked the 24th quarter in a row of rate increases, it showed slight relief for buyers when compared to the average rate increase of 8.9% in Q2.

News built for finance pros

CFO Brew helps finance pros navigate their roles with insights into risk management, compliance, and strategy through our newsletter, virtual events, and digital guides.

Commercial property insurance, a real source of pain for insureds last year, should be less chaotic, according to Auden.

“I think in property, the pace of rate hikes could slow quite a bit this year, barring some large losses,” he said.

Auden based this prediction on a relatively stable property catastrophe (CAT) reinsurance treaty renewal period this year compared to 2023. A hike in reinsurance (insurance for insurers) pricing will in turn drive up rates on primary policies. The Insurance Journal last year described the treaty renewals as the “hardest [P/C] reinsurance market in a generation.”

WTW predicted rates for properties with no CAT exposure will be flat to up 10%. Rates on CAT-exposed properties should increase between 10% to 25%.

Easing up. Most organizations can also rest easy come renewal for their cyber liability policies. In a recent report, brokers at Woodruff Sawyer noted 65% of its clients enjoyed cheaper cyber insurance policies in the second half of 2023.

Auden said many organizations should expect cyber rates to flatten or even fall this year. He also warned the cyber insurance market softening could mean trouble for carriers.

“That [cybersecurity] is still kind of a new and evolving risk,” Auden said. “We worry about companies growing fast in cyber and not having appropriate data” to set rates.

For years, workers’ compensation has been a profitable line for insurance carriers, Auden noted. This is due to favorable loss development from things like safer workplace practices. Fears of a spike in claims related to Covid-19 never materialized, either.

Insurance buyers in turn have benefited from rate decreases. This year should be no different. WTW predicted workers’ compensation rates will fall between 1% and 3%.

News built for finance pros

CFO Brew helps finance pros navigate their roles with insights into risk management, compliance, and strategy through our newsletter, virtual events, and digital guides.