The insurance industry is poised for relative stabilisation in 2025 following years of disruption, Stonybrook Capital stated in its 2025 P&C Outlook.
According to analysts, while some commercial lines may see moderate price decreases as capacity and competition normalise, persistent factors like sticky price inflation and social inflation will temper these reductions.
Insurers are advised to balance competitive pricing with underwriting discipline to protect profitability. Regarding reinsurance, costs are expected to stabilise, providing predictability after periods of volatility, analysts noted.
Additionally, Hurricane Milton lessened the severity of rate decreases that would have been larger without its impact.
Stonybrook Capital analysts also expect consolidation to accelerate, with mergers and acquisitions creating larger, more diversified players. Private insurers and Insurtech companies are operationally ready to go public, fuelled by a growing IPO pipeline and strong investor interest.
This surge in IPOs is anticipated to be driven by private equity investments and industry consolidation, capitalizing on favourable market conditions.
“The P&C insurance market will be shaped by dynamic factors, including persistent economic volatility affecting costs, revenue, and investments and the growing influence of technology. Insurers face rapidly increasing demand for cyber threats, shifts in the nature of catastrophe losses, and geopolitical uncertainty,” Stonybrook Capital stated.
Adding: “Global insured catastrophe losses are expected to exceed $135 billion, which is expected to contribute approximately 6.4% of global P&C Industry gross written premium (GWP). Overall, these catastrophe losses remain manageable. Lower risk-free rates will likely pressure profitability, demanding efficient capital use.”
Analysts also shared their outlook for major US lines of business, noting that personal lines are benefiting from easing inflation and strong premium growth, particularly in auto insurance.
However, rising material and labour costs continue to pressure profitability.
The E&S market continues to expand, driven by profitable underwriting profitability from successful rate hikes.
Higher claims frequency and severity due to increased traffic post-pandemic keep pressuring the commercial auto market. However, insurers are improving underwriting decisions using advanced analytics, driving moderate overall premium growth, analysts have observed.
Regarding property, including catastrophe, insurers in these lines are facing a growing threat from secondary cat perils like wildfires and severe convective storms (SCS).
These events have now become of equal concern as major hurricanes or earthquakes, even in areas not traditionally considered high-risk.
Coastal property insurers face additional challenges, with rising reinsurance costs and escalating risk assessments squeezing profitability despite improvements in their overall performance.
Growth in program and fronting businesses remains robust as MGAs and their aligned specialty insurers seek capacity in a hard market.
Reinsurers continue to push fronters to take net risk participation. Enhanced collaboration between primary insurers and reinsurers is driving innovation and diversification.
Finally, Workers’ compensation insurers are benefiting from a positive environment, with a favourable claims environment due to improved workplace safety, a more experienced workforce, and reduced frequency.
However, Stonybrook Capital concluded, benefit inflation and medical cost trends are being closely monitored.
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