Inflation, climate and catastrophic losses, and reinsurance costs could all disrupt this slightly optimistic forecast.
There are signs that the extreme spikes in property insurance may be softening.
Woodruff Sawyer predicts that there will only be single-digit increases in property and casualty insurance rates in 2024, and Ivans reported that the pace of increases eased for property insurance in November, increasing 9.9%, down from the 10.4% increase in October.
Most (but not all) insurance products experienced rate increases in 2023, however some markets saw rates go up at a slower pace than they did the previous two years.
However, inflation, climate and catastrophic losses, and reinsurance costs could all disrupt the forecast, Woodruff Sawyer said.
“Contributing to the challenges in the property market is valuation,” according to the report. “Some insureds have not been proactively increasing replacement cost values, and when large industry losses occur, it has a negative impact on the entire industry.”
Sean Kent, senior vice president of Insurance at FirstService Financial, says most of the property and casualty insurance reports on pricing trends and the 2024 outlook indicate a softening in property insurance rates, which means a leveling off of rates or even a drop can be expected.
“After a few years of insurance carriers hedging their losses by padding their portfolios with increased rates and deductibles, there appears to be added flexibility on renewals and increased capacity to generate more competition for new business,” Kent says. “Plus, 2023 was a major reset year for reinsurance carriers that applied significant rate increases, presumably to avoid more of the same in 2024.”
But property insurance market trends vary significantly from one geography to another, and the property classification greatly impacts an underwriter’s ability to offer competitive terms, according to Kent.
For example, a Class A office building in Chicago may see a favorable property renewal in 2024, whereas a 30+ story condo building on the coast of Miami may continue to see rate increases in the new year, he said.
“Habitational real estate risks like condo buildings, apartment buildings, and townhomes are viewed as a much riskier class of business,” Kent says. “Plus, many of those properties are built with frame construction, which also falls into a less favorable category. Areas deemed to be potential catastrophic loss zones are still challenging for most insurance carriers after consecutive years of record-breaking losses resulting from natural disasters.
“Hurricanes, wildfires, wind, and hail storms have wreaked havoc for insurance companies in recent years, and properties in areas with those exposures might have a longer road ahead until there is a leveling off in property insurance.”