An overview of The Council of Insurance Agents & Brokers’ Commercial Property/Casualty Market Index Q2/2024 and marketing conditions beyond.
Each quarter, The Council of Insurance Agents & Brokers releases its Commercial Property/Casualty Market Index. Here, we review the 2Q 2024 findings, which utilize data from April 1 through June 30, 2024. We also consider current conditions to provide context for risk transfer solutions and strategic planning for emerging risks.
PREMIUM PRICE CHANGES
At this year’s halfway mark, the market saw a welcome slowing of premium increases across all account sizes at an average of just 5.2%, down from 7.7% in the previous quarter. After four quarters of the highest increases, the biggest relief was felt by medium-sized accounts, down from 8.5% in 1Q 2024 to 5.1%. This was the 27th consecutive quarter in which rate increases were experienced by commercial insurance consumers of all sizes.
For those looking for conditions to continue their march toward a soft market, this quarter presented hope as premiums increased by just 5.6% on average for all lines of business, down slightly from 5.9% in the previous quarter. Most notable was the decrease in premiums for four lines of insurance this quarter – cyber, directors and officers, employment practices liability, and workers compensation.
The stabilization of cyber premiums was a welcome development in contrast to skyrocketing rates with 20% increases per quarter just two years ago. In 2Q 2024, rates saw an average decrease of 1.7%, the second lowest of all lines behind workers compensation, in which respondents noted that “carriers leveraged decreases in that line to offset increases in other lines.”
The highest premium increases this quarter were felt in commercial auto at 9.0%, down from 9.3% in 1Q 2024, and commercial property, which followed close behind at 8.9%, down from 10.1% in the previous quarter.
This was the first quarter since 3Q 2019 that no line saw an uptick in premiums into double digits. Additionally, increases were either similar to or came in below the previous quarter.
Amid the welcome break from high increases and the hopeful trajectory, caution should prevail as hurricane season is not yet over and the threat of natural catastrophes occurring before the end of the year and reversing this trend is very real.
NOTABLE LINES OF BUSINESS
Cyber
Over the last five years, the cyber liability insurance market has faced dramatic ups and downs as it has matured. This quarter was the first time since 4Q 2018 that the line saw a decrease in premiums.
Conditions for the market in general such as an influx of fresh capital and additional competition may have contributed to carriers becoming less stringent and even bargaining in some cases to entice business. These factors, along with more capacity for the line, are thought to have played a role in declining premium rates.
While there has been some leveling out, this should not be mistaken for a decrease in the threats posed to businesses. Cybercrime is predicted to cost the world $9.5 trillion USD by the end of 2024, according to Cybersecurity Ventures, with ransomware and other extortion techniques accounting for nearly two thirds of the data breaches businesses experience.
“Claims studies show that both ransomware and business email compromise/social engineering attacks continue to rise. Current soft market conditions cannot continue in perpetuity with rising claims,” according to the CRC Group’s Cyber REDY Index Q2 2024 report.
Claims & Demand
The highest increases in claims this quarter came from two lines—commercial auto and commercial property. Commercial auto surpassed commercial property for not only premium increases but also for claims, coming in at a 52% increase, down from 63% in the previous quarter. Conversely, commercial property came in at 48%, up from 37% in 1Q 2024.
Commercial property saw the highest demand increases at 51%, followed by cyber at 44%, which was down from 53% the previous quarter.
Predictably, the top three concerns for policyholders were high current premiums, future premium increases, and limitations on coverage. Additionally, many business owners were concerned about the impact of technology on their revenue. For example, the recent CrowdStrike incident in which a software update brought airlines, banks, hospitals, retail, and many other businesses to a screeching halt.
As of early September 2024, there were 20 natural disaster and weather-related events where losses exceeded $1 billion, according to the National Oceanic and Atmospheric Administration (NOAA). This included a cyclone and wildfire, winter storms, and severe storms. For context, the average number of events since 1980 comes in at just 8.5 and the last five years at 20.5, leaving this year destined to exceed those numbers. The question is, by how much?
If significant catastrophe events do not occur between now and the end of the year, we could see rates continue to decline into 2025, which would be welcome relief after years of significant, and sometimes devastating, increases.
To secure optimal premium rates and coverages no matter where the market moves, business owners should engage an expert insurance advisor who not only understands the intricacies of their business but also has the carrier relationships and risk transfer solutions necessary for the challenges of today’s market realities.
Email bevrlee.lips@ioausa.com for the full report.
