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2024 RT Binding Authority Market Update

Overall, the E&S market continues to thrive in 2024 after premiums more than doubled between 2019 and 2023 with commercial lines leading the way. The E&S segment is far outpacing the admitted space as admitted carriers in the US struggle with state legislation restricting them from obtaining adequate rates and the ability to address inflation. As a result, we are seeing admitted carriers pull out of problematic states or cut back on writings because they simply cannot get the rates, terms, or conditions required to produce an underwriting profit. The E&S market opportunities continue as admitted carriers in the US anxiously await legislative reform at the state level.

In 2024 the property and casualty insurance market has continued to be impacted by trends from previous years as well as new and emerging developments. Many commercial lines of business saw average premium renewal increases year over year in Q1 of 2024. Reasons for rate increases include Southeast and Gulf hurricane activity, countrywide insurance to value (ITV) deficiencies, concerns over economic inflation and interest rates, and worrisome large settlements and nuclear jury verdicts. In addition, the market is taking a closer look at convective storm activity and long tail reserve deficiencies in the casualty market. The race to embrace the latest and greatest technology extends into 2024 as the industry works to analyze underwriting results and trends and take advantage of opportunities for digital underwriting.

As we move towards the hurricane season, the coastal property market looks somewhat uncertain. 1/1/2024 CAT property treaty (reinsurance) renewals were less tumultuous than in 2023, and rate increases leveled off compared to the previous year. While reinsurers maintained underwriting discipline, risk adjusted pricing flattened compared to the prior year. In turn, carriers have obtained and deployed additional capacity in the mid-Atlantic and Northeast, and to a smaller extent, in the Southeast / Gulf area. Despite a benign US Atlantic hurricane season in 2023, higher rate levels are still prevalent for property lines, especially in coastal areas.

However, we are starting to see some rate increases begin to taper off as a modest amount of additional capacity starts to flow into the market. Barring an active 2024 hurricane season, we expect to see stabilization of pricing increases, and for insurers to focus on risk differentiation and pricing accuracy through advanced analytics and data driven underwriting. Overall, we believe another year of strong, sustained profits will be necessary before the property market truly begins to soften.

Outside of coastal CAT, an increasing focus of the US property market has been on severe convective storms and other non-traditional CAT activity. According to the recent Q1 2024 Aon Catastrophe Recap, the first quarter opened with around $45B in natural catastrophe economic losses worldwide and $17B in Insured losses.

In 2023, the industry saw the following:

  • Several convective storm events plagued the US. The Midwest region was hit hard with multiple separate billion-dollar weather events throughout the spring and summer.
  • The wildfire season in CA was relatively inactive, instead they experienced a billion-dollar flooding event in early spring. The exit of admitted markets within the state continues to be a nuanced consideration as well.
  • The US was impacted by a major firestorm event, devastating the state of Hawaii in August.

Increased development in convective activity and other catastrophic loss has resulted in many carriers applying wind / hail deductibles in non-traditional territories and/or constricting terms by adding exclusionary wording. We expect carriers to continue to focus on geographies where adjustment in terms and conditions is required to maintain an underwriting profit.

In the casualty market, economic, social, and medical inflation support increased indemnity, severity, and settlement costs. Further, carriers are experiencing increases in defense and cost containment expenses. Several prominent casualty insurers posted adverse reserve development for longer-tailed lines for the 2016-2019 years, and additional conversations are being had about adverse development in more recent years as well (2020, 2021). We are seeing liability carriers continue to tighten underwriting guidelines and institute rate increases to account for these trends. There appears to be an overall reluctance amongst casualty writers to release reserves for previous years so this will be an interesting story to watch as we move through 2024.

Regulatory impact will also be a key factor in 2024. On a global scale, at least 64 countries are holding national elections. While this won’t necessarily affect insurer profitability in 2024, the outcomes may prove consequential for years to come especially in areas such as climate risk disclosure, ESG (environmental, social, and corporate governance data) considerations, and cyber security regulations.

Technology and data capabilities remain a critical area of attention for the industry at large in 2024. IT expenses continue to increase as carriers and brokers strive to invest in the best technology to harness and optimize data. AI technology is beginning to move from pilot stage to full adoption as carriers, wholesalers and retailers all strive for more efficient processes, especially for small business transactions. Cyber and data threats continue to materialize, resulting in additional cyber security investments and in turn, technology costs.

As a result of persisting market trends and economic factors, we expect reinsurers and insurers alike to continue underwriting discipline and some level of rate increases. RT Binding teams are accessing a plethora of markets and employing creative strategies to assist retail clients with property and casualty placements. From simple to difficult, we deliver solutions for your clients so we can successfully navigate the E&S landscape together.

Aon Q1 Global Catastrophe Recap
Renewal rates in Q1 increase for most commercial lines from Q4 2023: Ivans
E&S: 2023 data shows double-digit growth, underwriting outperformance
Conning: Insurance Industry Outlook for 2024
Looking Ahead: A Guide to Property & Casualty Risk Management and Insurance in 2024

RT Binding Authority’s Market Update is provided for general information purposes only and represents RT Binding Authority’s opinion and observations on the current outlook of the [Industry] Insurance market and does not constitute professional advice. No warranties, promises, and/or representations of any kind, express or implied, are given as to the accuracy, completeness, or timeliness of the information provided. No user should act on the basis of any material contained herein without obtaining professional advice specific to their situation.

RT Binding Authority is a part of the RT Specialty division of RSG Specialty, LLC, a Delaware limited liability company based in Illinois. RSG Specialty, LLC, is a subsidiary of Ryan Specialty, LLC. RT Binding Authority provides wholesale insurance brokerage and other services to agents and brokers. RT Binding Authority does not solicit insurance from the public. Some products may only be available in certain states, and some products may only be available from surplus lines insurers. In California: RSG Specialty Insurance Services, LLC (License #0G97516). ©2024 Ryan Specialty, LLC