According to analysts at Goldman Sachs, the moderating pricing momentum in the Property and Casualty (P&C) sector has persisted in the early months of the year and is expected to continue throughout 2024.
Goldman comments, “Price momentum has naturally moderated after the strong increases in 2020-21.”
In 2022, there was a price increase of about 5.7%, followed by roughly 4.6% in 2023. This moderation in pricing momentum has carried over into January and February, with increases of 3.7% and 3.8%, respectively.
Insights from Beazley, Hiscox, and Lancashire during FY23 analyst calls indicate that market conditions in the P&C sector remain favourable in 2024. Premium increases are supported by disciplined and selective growth in business lines with stronger pricing compared to claims inflation dynamics.
For instance, Goldman Sachs notes that all three companies plan to expand their Property lines further in 2024, benefiting from robust price momentum relative to other segments. Additionally, Beazley and Hiscox maintain a cautious approach toward Casualty, while Lancashire is expected to see growth due to its diversification strategy from Property-Catastrophe.
While pricing momentum has moderated, insurance claims related to weather events, social inflation, and cyber incidents, “will likely drive continued demand, hence sustain the positive price momentum whilst insurers maintain disciplined growth,” explain analysts.
Swiss Re reported significant insured losses exceeding $100 billion for the fourth consecutive year in 2023 due to numerous low single-digit billion-dollar events. Meanwhile, Gallagher Re notes tight reinsurance capacity for frequency protections from the January 1, 2023 renewal, indicating sustained price momentum throughout 2024.
Goldman Sachs’ report emphasises the increasing challenges insurers face from social inflation, particularly in North America and the US. Hannover Re warns of elevated individual claims payments post-pandemic restrictions, increasing pressure on insurers in the casualty segment. Swiss Re predicts a continuous surge in US social inflation, with no respite from economic disinflation or stronger investment returns.
Additionally, the report notes, “2023 has seen a record-breaking year for ransomware”. Ransomware claims frequency rose by 27% in the first half of 2023, with attacks increasing by approximately 95% in the third quarter compared to the previous year.
Lloyd’s of London highlighted the potential impact of Generative AI on the cyber landscape, projecting increased frequency, severity, and variety of smaller-scale cyber attacks in the next 12-24 months.
Beazley anticipates growth in its cyber business in 2024, particularly in Europe, while analysts at Goldman Sachs suggest that the development of cyber exposure and its impact on combined operating ratio (COR) from cyber losses will remain a focal point.
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