According to Bank of America Securities analysts, it is already difficult to claim that the industry is in a true hard market for commercial lines for property & casualty (P&C), and they believe that this will become “increasingly clear” through 2024.
Analysts also noted that they think margins will expand in reinsurance as the hard market continues, however volumes could wind up disappointing.
Moreover, across P&C, appetite is said to be “slowly moving” from reinsurers to personal lines where price/earnings momentum is more favourable into 2024.
Analysts stated that this makes sense due to 2023 being a year of crowded defensive concentration, and they now see plenty of room to now look towards more diversified/life names.
However, after a year of recovery in 2023, analysts said that they expect another strong year for European P&C insurers, with combined ratios (CORs) expected to improve further, driven by meaningful improvement in reinsurance margins, as well as further improvement in primary margins, mainly driven by personal lines.
“The outlook for pricing is neutral to positive, with the hard markets set to continue in personal lines and reinsurance. However, we see mixed trends emerging in commercial, with softening of liability offset by hardening in property and specialty,” analysts said.
The outlook for 2024 is looks to be stronger, with further hardening of personal lines pricing and continuation of hard market trends in reinsurance, expected to be seen.
“We see a more balanced year for commercial lines insurers as pricing will likely continue to soften in some lines, driven by increased competition as underlying margins are already at very attractive levels; but strong pricing from 2023 will earn through.”
In addition, analysts noted how they see a continuation of the hard market in reinsurance helped by the lack of new capital inflows over 2023, as well as continued discipline across the market.
But, they also added, that despite remarkable pricing momentum being achieved at the 2023 renewals and discounting tailwinds, underlying combined ratios will remain broadly stable YoY.
Analysts also explained that they expect buffer-building exercises to moderate next year, which could wind up leading to a very strong improvement in their underlying COR forecasts for 2024.
A more stable commercial insurance outlook is also expected as price increases continue to moderate across the space, following years of hardening. This comes as underlying profitability for commercial insurers is already tracking at “very attractive levels”, with the industry’s pricing discipline sustained over the last few years to remain ahead of elevated inflation levels.
Lastly, analysts highlihgted how they expect the personal lines recovery to continue in 2024 after a slower-than-expected turnaround over 2023.
“We see price rises achieved over 2023 earning positively into CORs which should gradually recover back to pre-COVID levels throughout 2024. The speed of recovery is different across geographies, with the UK now leading the charge but with slow progress in Spain and Italy.”
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