Early in 2024, I wrote about the insurance industry’s “transitional market.” Inflation was easing, interest rates were up, combined ratios were coming down, and it was just a matter of time before the market started softening.
Early in 2025, I can report that market conditions have continued to improve and that the P&C industry is once again profitable. Unfortunately, improved financial positions have not translated to lower renewal rates in most coverage lines, so the news we will be giving clients in 2025 will not be much different than it was in 2024.
U.S. carriers were $4.1 billion in-the-black for the first 9 months of 2024, a marked improvement over $32 billion loss during the same period in 2023. This resulted from an improved combined ratio of 97.9 and reserves growing by $8.5 billion (AM Best’s Nine-Month 2024 US P/C Financial Results)
A strong majority of carriers are bullish on 2025. Seventy percent of U.S. insurers expect growth of 6% or higher, including 26% who expect to grow at 11% or more. Additionally, nearly 80% of carriers reported sufficient or excess capital to fund existing initiatives, while about 20% said they felt pressure to restrict growth or bolster their capital positions (AON survey)
According to Alera Group’s annual Market Outlook report: improved underwriting results, slowing inflation and higher investment yields give the P&C Industry a positive outlook for 2025. They say pricing competition and better reinsurance terms will contribute to improving conditions for insurance buyers. They also warn that extreme weather and legal system abuse remain as concerns for the industry.
Personal Lines Outlook:
AM Best recently upgraded the sector from negative to “stable” for 2025, as insurers continue to adapt to heightened frequency and severity in claims. Personal auto insurance was also upgraded to “stable,” helped by recent rate hikes, more granular pricing, and the adoption of new technologies.
Challenges remain in homeowners insurance, causing AM Best to continue a “negative” rating in this segment. The expected continuation of weather-related catastrophic events (hurricanes, severe convective storms and wildfires) is a key factor, as are higher costs per claim. Additionally, carriers face difficulty with growing rates to meet the cost of claims. This is because the standard twelve-month policy period affords few opportunities to take rate, and because pushback from regulators can prevent sufficient rate hikes.
Expect the Personal Lines Umbrella market to remain tight and rate increases to accelerate. Skyrocketing liability claims, auto liability losses and new personal liability reeks stemming from social media are to blame (Willis Towers Watson Marketplace Realities 2025)
According to Amwins’ State of the Market 2025 report, we can expect abundant capacity and appetite for personal lines flood risks, for everyone outside of Florida. Technology is allowing more granular pricing, and private insurers are beginning to expand coverage offerings to outshine the NFIP’s limited offerings.
While it is a great sign that carriers’ financial outlooks are improving, that does not mean that personal lines policyholders are not going to see single-digit premium increases again in the great state of Wisconsin in 2025.
Commercial Lines Outlook
AM Best’s outlook for commercial property and workers’ compensation lines in Wisconsin are “stable.” Commercial Excess and Surplus lines are rated “positive.” These lines balance out the “negative” outlooks on certain casualty lines, including General Liability, commercial auto and Directors and Officers, to give the overall Commercial P&C segment a “stable” assessment to start 2025.
Pricing is improving in the segment, with commercial lines premiums overall rising 5% through the first three quarters of 2024 (Council of Insurance Agents and Brokers). Commercial property premiums were up most at 9%, but that’s down from the 18% average increase seen in 2023.
These rate increase projections are for the U.S. P&C market, as a whole. It’s encouraging to see increasing competition and softening markets predicted in some segments, but we all know there are also availability factors by region. While a commercial property in Vermont may see a decrease in rate, the same type of risk in Green Bay, Wisconsin might have a slight increase. In Florida or California, coverage might not even be available through a private insurance carrier.
Feel free to send me any comments or questions at nate@ns.insure. I’m always interested to hear what is going on in your neck of the woods!