North America’s property insurance market will start to see more stability, capacity, and in some cases, rate relief as carriers eye growth in 2024 and new entrants bring more options to the table, according to specialists at Lockton.
“Some of our major partners are talking about growth in 2024, in terms of risk appetite, premium, and deployment of cat aggregate,” said Tom Rowley (pictured on the right), head of North American property in Lockton’s Europe division. “We are also seeing new entrants to the market in addition to increased appetite.”
Simon Scholfield (pictured on the left), head of P&C specialties at Lockton, forecasted that North American property insurance capacity would continue to grow in domestic markets as well as in London. He shared his views on the back of what he called “a relatively stable” reinsurance renewal season.
“With this massive increase in capacity in London and all over the world, companies will need to write business to build their premium quotas, which means rate relief, ultimately,” Scholfield said. “Depending on however many catastrophes occur this year, I think we can start to see significant changes ahead towards the end of 2024.”
Rowley said changes on the horizon will bring much-needed relief to US and Canadian clients who have seen years of price increases and challenging renewal periods.
“We had a period of cost increases, increases in retentions, and uncertainty [in 2023], so there were some challenges in placements, particularly in some of the excess layers, for heavy catastrophe exposed accounts,” Rowley told Insurance Business.
The message Scholfield wants to convey to clients at this time is increased stability.
“There’s an abundance of capacity and we can start broadening the coverage that was redacted a few months ago and rebuild from there,” Scholfield said.
Still, it won’t be plain sailing for everyone, especially those in more challenged classes of business such as food and beverage and habitation.
Rowley encouraged insureds looking to tap Lloyd’s capacity to meet with underwriters face-to-face to deliver their story, build relationships, and differentiate themselves in the market.
The Lockton leaders stressed the importance of being up-to-date on insured values and having a robust approach to risk management. They also highlighted carriers’ sharpening focus on secondary perils, such as wind and hail damages.
“There’s been a lot of severe convective storm losses hitting the market, and with increased retentions in the reinsurance programs, that will hit the primary US carrier market quite significantly,” Rowley said. “Some of these non-traditionally focused-on cat perils are coming to the fore and becoming more challenging.”
For Rowley, significant “client fatigue” following consecutive years of rate increases and increased retentions has driven more innovative solutions for coverage. He noted that premium spend among Lockton’s client base has increased substantially in the last five or six years.
“There is client fatigue, as we’ve seen increased retentions, either pushed by the market or voluntarily taken by clients,” Rowley said.
“The cost of buying a program has also increased significantly, and in some cases, the terms and conditions and the coverage provided have been restricted a fair bit as well. I think that has driven the market to look at some of the alternative risk transfer strategies, for parametric or structured solutions, or other ways of retaining risk.”
To address rising demand, Lockton is building out its parametric solutions teams in the US and London, according to Scholfield.
Rowley, who joined Lockton in late 2023 and was previously head of North America property at WTW, also pointed to growth in the North American D&F (direct & facultative) property as a positive sign for the market.
“The challenge [in D&F] in the last couple of years is that there’s been so many submissions flowing into the market, that underwriters haven’t been able to deal with it,” Rowley said.
“The better brokers have been able to navigate that, get the attention of the underwriters, and get submissions to the market in a manner that can be easily engaged with the capacity.
“As we essentially go into what we might call a transitioning marketplace in the US and Canada, how can we remain relevant? It comes down to us to try and harness that increased appetite and increased desire to write property and deliver that to clients.”
What is your outlook on the North American property insurance market for 2024? Share your comments below.
