Q1 2024: Global Insurance Market Overview

Q1 2024: Global Insurance Market Overview
May 1, 2024 17 mins

Q1 2024: Global Insurance Market Overview

Positive performance in 2023 fueled insurer growth ambitions but underwriting remained disciplined in the first quarter of 2024.

Key Takeaways
  1. The moderating market conditions that emerged for most lines of property and casualty insurance during 2023 continued into the first quarter of 2024, with pricing and capacity in the property market showing material improvement.
  2. The D&O market remained soft but underwriting caution became more prevalent.
  3. Insurer growth focus sharpened as year-end targets approached, but underwriting remained disciplined and risk differentiation gained further importance.

After a prolonged period of adjustments to their appetite, capacity strategies, pricing models and coverage terms, many insurers returned to profitable positions in 2023, leading to healthy appetite, more underwriting flexibility, the availability of coverage options, and abundant capacity across much of the market, especially for preferred risk types. This positive insurer performance created tailwinds in the first quarter of 2024, which saw ambitious insurer growth targets amidst a competitive, well capitalized market environment.

While growth was positioned as a top insurer priority, we also saw insurer strategies shift toward building more sustainable partnerships with insureds through risk differentiation strategies, including selecting, pricing, and solutioning risks to support longer-term profitability and program stability. In the short run, this may mean that some risks will transition to new structures or providers, while over the longer term, insureds will benefit from increased program stability and stronger insurer relationships. While traditional “class” underwriting will continue, we expect risk differentiation to gain momentum as a mechanism to promote a sustainable alignment of solution-to-risk.

Q1 also saw a continued shift in insurance industry and corporate perceptions of alternative risk solutions such as parametric, captives and facilities. Historically, alternative risk solutions were seen primarily as a way to fill gaps left by traditional insurance. Now, with the explosive growth of data, and the availability of innovative analytic solutions, alternative risk solutions have become an integral component of effective risk transfer and financing strategies. Indeed, corporate risk strategies now commonly include traditional insurance, reinsurance, and alternative solutions, informed and enabled by myriad data-driven insights.

Amidst these broad market trends, specific changes in the Property, Liability and Directors & Officers (D&O) markets emerged in Q1:

  • Driven largely by improved performance and favorable January 1st treaty renewals, the Property market showed material improvement, with capacity generally available and targeted rate decreases by quarter’s end.
  • As insurers turned their focus toward a longer-term view of portfolio performance, Directors & Officers underwriting caution strengthened, and price decreases decelerated in some geographies. This was largely driven by insurer concerns related to legacy claims as well as ongoing risks including insolvency filings, increasing securities class actions, and rising legal costs and settlement values.
  • Globally, underwriting concern grew related to social inflation resulting from large legal verdicts as financial settlement values that were once only seen in class actions or multi-claimant litigation are now frequently seen in single claimant cases. While US outcomes have historically made the headlines, the social inflation phenomenon is broadly expected to impact more geographies and accelerate in severity.

Against the backdrop of continued economic uncertainty, geopolitical instability, large-scale climate-related events, and shifts in the labor market, and despite anticipation of potential impacts from the late-quarter collapse of the Francis Key Scott Key Bridge in Baltimore, Maryland, the insurance market demonstrated continued resilience through Q1. And there is good reason for continued optimism. Early reports of April 1st renewals indicate that insurer competition, especially for Property, is increasing, which is welcome news for our clients. In 2024, the industry’s rapidly growing data and insights will gain further momentum in informing organizations’ risk transfer strategies and enabling innovative solutioning. At the same time, risk differentiation strategies will help brokers and insurers match existing and new solutions with the right risks, meeting clients’ evolving needs while enabling stronger relationships.

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With the explosive growth of data, and the availability of innovative analytic solutions, alternative risk solutions have become an integral component of effective risk transfer and financing strategies.

Joe Peiser
Joe Peiser
Chief Executive Officer, Commercial Risk Solutions

Insurance Market Overview

Expand the options below to read a summary of how the insurance market trended in Q1 2024 across pricing, capacity, underwriting, limits, deductibles and coverages.

Q1 Market Dynamics

global Market Dynamics

  • Pricing

    While inflation and insurer focus on longer-term profitability continued to pressure pricing upward, robust capacity and healthy competition served to dampen any increases across much of the market. Modest increases or flat pricing became increasingly common with some reductions available, particularly for Cyber and Directors & Officers placements. Where significant increases had been mandated during recent renewals, underwriters showed greater flexibility on current quarter pricing. As insurers sought to match appetite with risk, risk differentiation became a more pronounced strategy and insurers priced accordingly.

  • Capacity

    Insurer growth targets, together with favorable reinsurance renewals, led to a further expansion of insurer appetite and an increase in capacity from established insurers and new market entrants. Preferred and well-performing risks experienced an abundance of capacity, including oversubscription in some cases, while some challenging risk types such as auto fleet risks and non-US domiciled risks with significant US liability exposure continued to experience limitations. Appetite for alternative solutions such as captives, facilities and parametric solutions continued to strengthen.

  • Underwriting

    Underwriting was disciplined as underwriters sought to differentiate risk quality and increasingly relied on data and modeling to focus their appetite and maintain profitability. Targeted risk types with a compelling risk management narrative and favorable loss record achieved superior outcomes. In the face of rising litigation trends, US liability and auto fleet exposures remained key areas of underwriting focus, and some underwriters limited their exposure through buffer layers, corridor deductibles, and ventilation strategies.

  • Limits

    Despite continued inflation, increasing exposures, and concerns related to nuclear verdicts, most placements renewed with expiring limits; however, some limits were increased through expanded insurer participation on targeted risks. In some cases, insureds chose to decrease their limits in exchange for a premium reduction. In the scattered instances where insurers imposed limit reductions, co-insurance and alternative solutions were leveraged to fill any gaps.

  • Deductibles

    Expiring deductibles were available for most placements; however, in some cases such as natural catastrophe property risks, US liability risks (especially on non-US domiciled risks) and programs where risk improvement recommendations had not been satisfied, deductibles and attachment points were carefully (re)considered. Insurers leveraged buffer layers, corridor deductibles and upward shifts in their tower positions to manage their exposures. Deductible options continued to be explored by insureds seeking to optimize program design.

  • Coverages

    Most insurers sought to differentiate through expanded coverage and enhancements for quality risks, especially where competition was strong, and in some cases, such enhancements were available for no additional premium. Per-and polyfluoroalkyl substances (PFAS) exclusions were widely imposed on liability risks – often, regardless of confirmed PFAS exposures. Communicable disease and territory restrictions were generally not considered for renegotiation. Wildfire related language was scrutinized. In some markets, co-insurers imposed verbose endorsements to Property policies that served to complicate the loss adjustment process.

Global Insurance Product Trends

Expand the options below to read a summary of how the insurance market trended in Q1 2024 across key lines of business, including Automobile, Casualty/Liability, Cyber, Directors & Officers and Property.

Q1 Market Trends by Product

global Market trends

  • Automobile

    The market remained moderate-to-challenging, driven by poor loss ratios as accident frequency remained high and costs were pressured by inflation, supply chain issues and the higher cost of enhanced technology components. Insurers continued to impose rate increases and higher deductibles on claims-impacted risks while well-performing risks generally experienced more modest increases – primarily inflation-driven – and some flat pricing, especially when competition was introduced. Telematics and other vehicle safety and driver training initiatives remained useful underwriting levers. Buffer layers, corridor deductibles and alternative risk solutions gained traction as insurers sought to manage their exposure and insureds sought cost-effective solutions.

  • Casualty/Liability

    Pressured by inflation, increasing claims frequency, and ongoing social inflation resulting from large legal verdicts – particularly in the US – that shows no signs of abating, insurer agendas were focused on sustainable pricing, placement structure and coverage terms. Rate increases were common, alongside deductible increases and a tightening of coverage, particularly on claims-impacted risks. Some Umbrella and Excess insurers increased minimum premiums, introduced corridor features, reduced their capacity deployment, requested higher tower positions, and in some cases, exited the Umbrella / Excess market. Underwriting was generally prudent but more rigorous on non-US risks with US exposures, risks with complex and critical products, environmental risks, and risks with pronounced ESG components such as oil, gas and coal. Notwithstanding, insurers were willing to differentiate individual risks, offering more favorable pricing and terms to targeted, well-performing risks with quality underwriting submissions.

  • Cyber

    Capacity was abundant and pricing was flat-to-soft. Amidst a more favorable pricing environment, organizations that had previously opted not to insure their cyber risk, have reconsidered, and many that reduced their limits in the hard market chose to increase them, using data and insights to support their requests. Many large and multinational clients now require that stakeholders in their value chain purchase Cyber coverage. Certain insurers restricted coverage with respect to systemic risk while others increased underwriting scrutiny related to privacy exposures and data collection (including biometric information, pixel tracking and new privacy/consumer protection regulations, and supply chain vendor risk management).

  • Directors & Officers

    Capacity remained abundant and competitive pricing continued amidst a market that was generally growth-focused, with demand down due to a prolonged period of decreased transactional activity from IPOs and M&A. That said, underwriting caution strengthened related to legacy claims as well as ongoing risks including insolvency filings, increasing securities class actions and rising legal costs and settlement values. Other issues percolating include ESG risks (e.g., disclosures; greenwashing), cyber security risks, inflation uncertainty and the potential impacts of regulatory changes. As a result, across much of the market, the pricing environment tempered, and price decreases decelerated. Following the material price reductions of the past 18 months, insurers may shift their focus to a longer-term view of portfolio performance in the second half of the year.

  • Property

    Driven largely by improved performance and favorable January 1st treaty renewals, the Property market in Q1 showed marked improvement from the challenging and volatile conditions of past quarters. While risks in higher hazard occupancies or with poor loss records continued to experience moderate rate increases, lower-hazard occupancy and well-engineered risks saw a further deceleration of rate increases in a trend that gained traction as the quarter progressed. By quarter-end, modest decreases were available for targeted risks. As insurers turned their focus toward growth, many desirable-to-average risks – including some with natural catastrophe exposure – experienced over-subscription at renewal. Across all risk types, underwriting remained prudent as insurers sought to maintain profitability and build relationships. Terms and conditions remained generally unchanged; however, enhancements to outlier wordings were available in some cases. Use of alternative solutions gained further momentum.

Insurance Market Trends by Region

Expand the options below to read a summary of regional insurance market trends in Q1 2024. For more detailed analysis, download and read the full report here.

  • Asia
    • Across the region, market conditions were mixed, with renewal outcomes varying by line of business. Natural catastrophe property risks remained challenged. Financial Lines saw a general softening.
    • Despite a robust international insurer presence in the region, opportunities remained for new entrants, particularly in niche products such as Cyber, Crypto, and Transaction Solutions. Capacity was sufficient as new insurers began writing specialty products either directly or through MGAs (which allowed insurers to reduce their entry costs).
    • Reinsurers sought premium and retention increases through the January 2024 renewal cycle with increased treaty costs driving increases in the direct market.
    • On 3 April 2024, a 7.4 magnitude earthquake struck the east coast of Taiwan. Damage assessments are still being undertaken. Taiwanese corporates, particularly in the technology and life sciences sectors, generally tend to purchase property damage and business interruption insurance. Due to the location of the quake, we anticipate moderate Property losses for insurers (and their reinsurers); these come after significant COVID pandemic claims and will further negatively impact profitability. If Business Interruption coverage is triggered, these losses could be significant given the tightness of supply chains and global demand.
    Q1 Asia Market Dynamics

    Asia Market Dynamics

    Q1 Asia Market Trends by Product

    Asia Product Dynamics

  • Europe, Middle East and Africa
    • The 2023 buyer-friendly cyber market conditions continued into Q1 2024. Increased competition and the availability of more capacity served to sharpen insurer focus on retention and encourage participation expansion. At the same time, the increase in frequency of incidents prompted clients to consider long-term goals for their cyber insurance strategy and to ensure that their cyber insurance strategy was complementary to their overall cyber resilience strategy.
    • The Directors & Officers market remained favorable; however, as the landscape grows increasingly complex with ESG disclosure requirements, cyber disclosures, and an increase in collective actions across the region, underwriting may become more conservative in the upcoming months.
    • Insurers remained concerned related to the growing frequency and severity of Casualty losses from US exposures. Insurers were also concerned about the potential impact on claims of the new laws and regulations anticipated across the region. Against this backdrop, competition strengthened for Casualty risks that did not have US exposures or exposures in high-risk industries such as pharmaceutical, chemicals or mining. Risks in such industries experienced challenging market conditions including capacity limitations, coverage restrictions and increasing deductibles and/or premiums.
    • Property market pricing remained moderate and pressure to increase retentions eased. Insurers focused on growing balanced portfolios. In light of previous adjustments to rate and retention levels, the 1/1 treaty renewals were broadly more positive than past renewals.
    Q1 EMEA Market Dynamics

    emea Market Dynamics

    Q1 EMEA Market Trends by Product

    emea Product Dynamics

  • Latin America
    • Client demand for Cyber coverage continued to increase and insurers stepped up. However, robust underwriting requirements have proven difficult to meet for most clients.
    • Facultative reinsurance has become more prevalent, driven by increasing natural catastrophe events (e.g., in Mexico and Argentina) and adverse losses.
    • Insured property values remained under scrutiny.
    • Significant pricing increases in recent years, combined with improved loss performance, brought tail winds for Directors & Officers, Marine and Casualty renewals. Some terms and conditions were also renegotiated.
    • Due to poor performance in recent years, risks in the mining, power, oil & gas, pharma, and agrochemicals (glyphosate and atrazine) industries faced continued challenges related to terms and conditions, pricing and capacity.
    Q1 LatAm Market Dynamics

    latam Market Dynamics

    Q1 LatAm Market Trends by Product

    latam Product Dynamics

  • North America
    • As insurers sought to balance their 2024 growth agendas with caution related to portfolio sustainability, appetites and attitudes toward individual and portfolio risk continued to shift, as did capacity deployment and attachment points. Insurers turned to careful risk selection and selective capacity deployment to support sustained performance.
    • Targeted and well-performing risks experienced favorable market conditions while challenged risks saw continued price increases (although more moderate than in recent years) and some targeted capacity limitations.
    • Momentum accelerated for alternative solutions including parametric solutions, structured insurance, facilities, panels, and captives as the risk environment continued to grow more complex, data-enabled, and interconnected. Natural catastrophe-exposed risks continued to dominate underwriting agendas and C-suite perceptions shifted from traditional views of the insurance mechanism toward a more strategic view of insurance as a form of ‘rented capital’ to be included in a firms’ capital allocation strategies.
    Q1 NA Market Dynamics

    na Market Dynamics

    Q1 NA Market Trends by Product

    na Product Dynamics

  • Pacific
    • The affordability of insurance for risks in natural-catastrophe exposed locations was again at the top of the political agenda. Rising weather-related claims frequency alongside inflationary pressures continued to drive insurance pricing, particularly in the personal lines space.
    • After a rebalancing of portfolios, the majority of insurers in Australia sought to use this new baseline to grow their portfolios in the short term. Certain risks are “in appetite” across most of the market, driving deeper inequity between risks that are in and out of favor with capital providers.
    • In New Zealand, the Property market continued to present challenges for insureds specifically in relation to Wellington Earthquake and Flood for certain areas of Hawkes Bay and Auckland. The 2023 Auckland Anniversary floods and Cylone Gabrielle are noted as the two costliest weather events on record for New Zealand at USD7.1 billion in economic losses raising questions around the robustness of loss models and rate adequacy for secondary perils. Learn more in Aon’s Reinsurance Market Dynamics report.
    • Climate change activists turned to the courts to hold accountable those perceived as contributing to climate change. A recent landmark judgement in NZ (Smith v Fonterra & Ors) made it harder for corporates to use the summary strike-out procedure to avoid lengthy/costly trials.
    Q1 Pacific Market Dynamics

    pacific Market Dynamics

    Q1 Pacific Market Trends by Product

    pacific Product Dynamics

Conclusion

The market moderation that began in 2023 continued into the first quarter of 2024 amidst a broadly growth focused market environment characterized by healthy appetite and abundant capacity availability. Insurer strategies were focused on risk differentiation and preferred risks with robust underwriting information generally experienced the most favorable outcomes.

Organizations’ reliance on data and modeling to enable risk decisioning – from quantifying risk, to structuring risk transfer, to identifying more creative and flexible alternative solutions such as parametric and captives – strengthened momentously.

Social inflation – including nuclear verdicts and rising settlement values – has become a global underwriting concern as financial settlement values that were once only seen in class actions or multi-claimant litigation are now frequently seen in single claimant cases. While US outcomes have historically made the headlines, the social inflation phenomenon is broadly expected to impact more geographies and accelerate in severity. Sensitivity to social inflation continued to become more pronounced across broad portions of the Auto, Liability, and Financial Lines markets and manifested as conservatism in insurer appetite, underwriting, coverage terms, and pricing for some US-exposed risks.

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The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information and use sources we consider reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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