News
Captive insurance industry news | Fitch: Hurricane Milton could cost insurers US$50 billion
Fitch has estimated Hurricane Milton’s insured losses will range from US$30 billion to US$50 billion, the largest amount since Hurricane Ian hit Florida in 2022.
Hurricane Milton made landfall on Thursday morning near Siesta Key, Florida, as a Category 3 storm, swept across central Florida, and exited the east coast as a Category 1, leaving behind significant economic and insured losses due to high winds, storm surges, heavy rainfall, tornadoes, and flooding.
Large-rated insurers with Florida exposure should expect Milton to have an impact on their Q4 and 2024 earnings, as projected insurance losses reach reinsurance attachment points, shifting a significant portion of the burden to the reinsurance market.
Fitch predicts that Milton will push global insured industry losses in 2024 past US$100 billion for the fifth consecutive year, with the elevated catastrophe losses likely curbing any potential rate declines in the property catastrophe market in 2025.
Ultimate losses will also depend on demand surge, as Milton follows closely on the heels of Helene — a Category 4 hurricane that devastated the Southeast US two weeks earlier.
Furthermore, the agency says the property market may face rising premium rates depending on final Milton losses and additional catastrophe claims in 2024, though the significant reinsurance price hikes seen in 2023 are unlikely due to the current more stable pricing environment.
2024 has been a year marked by significant global natural catastrophe activity, which, despite its frequency, resulted slightly below average financial costs through Q3...
The total economic loss from natural perils in the first three quarters of 2024 was at least USD280 billion, lower than the recent 10-year Q1-Q3 average of USD309 billion. Weather and climate-related disasters accounted for most insured losses, with the US bearing more than 71% of the year’s insured losses through September, surpassing the region’s decadal average.
The private insurance market and public insurance entities had covered at least USD108 billion of these losses, driven by a higher frequency of low to mid-size events, particularly in regions with higher insurance coverage.
Chief Science Officer at Gallagher Re, Steve Bowen, commented: "The recent landfalls of Milton and Helene in the United States – coupled with the significant third-quarter impacts from catastrophic flooding events in Europe, Asia and Canada – underscore the escalating volatility and intensity of weather and climate events.
“The global implication of compounded losses from these events highlights the urgent need for enhanced risk management strategies and innovative insurance solutions to better protect communities. It is clear that the industry and its collaborative partners must join forces to better adapt to this new normal of increasingly intensified natural catastrophe activity."
According to the report, when focusing solely on weather and climate-related disaster costs (excluding earthquakes, volcanoes, and other non-atmospheric events), the economic cost was at least USD264 billion prior to early October’s arrival of Hurricane Milton – lower than the decadal average of USD286 billion. In Q3, the most expensive individual event was Hurricane Helene, which struck the US in late September. Helene is expected to cost public and private insurers between USD10 billion and USD15 billion alone.
P&C insurance pricing peaks as commercial lines growth slows – TD Cowen
Interest rate reduction unlikely to affect P&C net investment income
TD Cowen released a 3Q24 property and casualty (P&C) insurance preview, outlining its expectations for the industry. The firm is generally positive on third-quarter results, anticipating favorable pricing with minimal impact from the recent interest rate cut.
Mixed catastrophe (cat) losses from Hurricane Helene are expected, and concerns remain about prior-year development in recent accident years.
TD Cowen suggests the P&C hard market may be nearing its peak, as commercial pricing decelerated slightly in the third quarter. MarketScout reported a 3.8% increase in commercial pricing, down from 4.4% quarter-over-quarter, while IVANS reported a 6.9% increase through August, compared to 7.1% the previous quarter. Loss trends are expected to remain stable, with most lines seeing mid- to high-single-digit increases.
It also continues to favor Arch Capital Group, Hartford Financial, and specialty insurer WR Berkley, citing their proven reserving methods and strong cycle management.
The Federal Reserve's September interest rate reduction of 50 basis points is expected to have a limited effect on third-quarter net investment income (NII) and brokers' fiduciary income.
Research
Home Reconstruction Cost Rollercoaster Stabilizes in 2024 | CoreLogic®
The COVID-19 pandemic was a defining moment that changed many things, including construction costs. While there are always regional differences in home reconstruction prices, the period between Q2 2020 and Q2 2021 saw unprecedented growth in material prices, with some areas spiking by almost 25%.
Following that spike, prices continued to rise, but at a slower rate, from Q2 2021 to Q2 2022 before declining and bottoming out between Q2 2022 and Q2 2023.
However, pricing once again picked up between Q2 2023 and Q2 2024, stabilizing at similar levels seen prior to the pandemic.
Reconstruction costs spiked by an average of 16.6% between Q2 2020 and Q2 2021 before dropping by -1.9% on average between Q2 2022 and Q2 2023.
San Francisco had the smallest average growth (10.6%) in reconstruction costs and New York had the largest increase (22.7%) during the pandemic (Q2 2020-Q2 2021). However, although the growth spanned the two extremes, both cities were among the top three most expensive areas in terms of overall pricing.
Reconstruction costs stabilized to slightly above pre-pandemic levels between Q2 2023 and Q2 2024 following a year of declines from Q2 2022 and Q2 2023.
CoreLogic
Property and Casualty Insurance Business Report 2024:
The The "Property and Casualty Insurance - Global Strategic Business Report" report has been added to ResearchAndMarkets.com's offering.
The global market for Property and Casualty Insurance was estimated at US$3.6 Trillion in 2023 and is projected to reach US$5.3 Trillion by 2030, growing at a CAGR of 5.9% from 2023 to 2030. This comprehensive report provides an in-depth analysis of market trends, drivers, and forecasts, helping you make informed business decisions.
Property and casualty (P&C) insurance provides essential protection for individuals and businesses against a wide range of risks, from damage to property and vehicles to liability for injuries. As risks evolve in a changing global landscape, such as the rise in cybersecurity threats, climate-related disasters, and technological disruptions, the P&C insurance market is adapting to meet these challenges.
The growth in the property and casualty insurance market is driven by several factors, including rising awareness of risk management, increasing regulatory requirements, and the expanding need for specialized coverage due to emerging risks like cybersecurity threats and climate change. The growing number of natural disasters, coupled with heightened property and auto values, is driving demand for comprehensive insurance coverage.
Extreme Weather Events Are Causing Home Insurance Rates to Skyrocket
If you think the cost of buying a house has gotten high, buyers and homeowners are also grappling with surging costs to insure their properties—and some of the country’s wealthiest enclaves are feeling it more than others.
Home insurance rates have risen for homes in every sector nationwide, but luxury residences are seeing the greatest increases. According to The Wall Street Journal, which cited data from Citizens Financial Group, premiums for mortgage loans of over $1.5 million rose a whopping 130 percent between mid-2020 and mid-2024. By contrast, costs increased just 12 percent for mortgages between $400,000 and $800,000 within that same time period.
Naturally, homeowners will pay more for properties that sit on the coast, near a forest, or by the desert, all of which are considered high-risk markets when it comes to climate disasters. As a result, several major carriers have pulled out completely from some states, including Florida and California.
“What I’m hearing companies saying is, I have less of an appetite for high-end homes,” Dale Porfilio, chief insurance officer at the Insurance Information Institute, told the WSJ. “Because that is an awful lot of money to put at risk for a single home that could be destroyed.” In the Golden State, companies including State Farm and Allstate announced they would stop offering new policies. In addition, the former will reportedly cut one million policies by the end of 2028. For those seeking an alternative, owners are now looking into self-insurance or dropping their coverage entirely.
Commentary/Opinion
Climate-related disclosure data can help reveal insurers’ business-critical risk insights
Insurance and reinsurance companies can use climate-related disclosure data to reveal business-critical risk insights, point to growth opportunities and lift the quality of their underwriting, according to Swiss Re’s Paloma Quiroga.
In a recent interview with Reinsurance News, Quiroga, Head Risk Consulting & Analytics explained that insurers face an array of disclosure mandates requiring them to document how their business models support ambitions to transition to a low-carbon emissions future, while addressing the implications of climate change for their operations.
“Beyond fulfilling regulatory obligations, however, insurance companies can use data analytics to reveal business-critical risk insights, point to growth opportunities and lift the quality of their underwriting,” she said.
InsurTech/M&A/Finance💰/Collaboration
Insurtech ClaimSorted Raises US$3 Million to Boost Operations
ClaimSorted, an insurtech company dedicated to streamlining claims processing, has raised $3 million in pre-seed funding.
The round was led by firstminute capital, with participation from YCombinator, Precursor Ventures, and Transpose.
Founded by industry veterans and best friends German Mikulski and Pavel Gertsberg, who had experience at Revolut Insurance and Lemonade, ClaimSorted aims to address the inefficiencies and frustrations often associated with claims processing.
The company’s AI-powered platform automates routine tasks, empowering human handlers to focus on complex cases.
By leveraging technology, ClaimSorted offers a faster, more accurate, and more cost-effective claims processing solution. The company has already seen success in the US, UK, and Europe, serving three insurance verticals.
According to reports, ClaimSorted plans to expand its operations and continue developing innovative solutions to transform the claims processing industry.
MassMutual to shut down insurtech subsidiary as Haven brand fades - Insurance News
Massachusetts Mutual Life Insurance Co. is folding its insurtech subsidiary Haven Technologies at the end of the year—the latest in a series of cuts to the insurance giant’s tech-focused spin-offs.
Haven Technologies and roughly half of its 123 employees will be absorbed into the larger corporation beginning in 2025, MassMutual confirmed. The remaining 63 workers will either lose their jobs or get the option to stay on with MassMutual, according to a notice filed earlier this month with the New York Department of Labor.
“Over time, it has become clear that the market for and economic structure of this standalone Software as a Service (SaaS) business isn’t viable,” a MassMutual spokesperson said.
While MassMutual’s bread-and-butter life insurance and annuities business has grown steadily in recent years, the Massachusetts-based insurer has now closed three subsidiaries in less than 12 months, highlighting the difficulties major insurance companies have faced in expanding to different business areas.
Haven Technologies, which developed and sold insurtech platforms to other carriers, grew out of fellow MassMutual subsidiary Haven Life in 2021. A blog post announcing the new business described it as a way to bring the technology powering Haven Life to other insurers in an industry that was too reliant on outdated software.
Just three years later, neither Haven brand is still standing.
AI in Insurance
1 in 3 Agencies Plan to Implement AI in Next 5 Years
While artificial intelligence (AI) tools have been used in the insurance industry for years in areas like underwriting, claims management and customer service, the introduction of generative AI tools like ChatGPT has made the technology more widely accessible and catalyzed implementation in everyday business.
Yet, only 6% of independent insurance agency principals say their agency has implemented an AI solution, according to the “2024 Agent-Customer Connection Study" by Liberty Mutual and Safeco Insurance. However, usage will likely accelerate in the coming years, according to the survey of 1,133 independent agency leaders, with 1 in 3 agency principals saying they are likely to be using AI in their business in the next five years.
Many agencies are exploring and learning about their options. Twenty percent of agents said they are starting to learn about AI, 27% said they are interested but aren't making it a priority, and 45% said they don't know enough about AI to make business decisions about it, the report said.
Majesco Copilot Sets New Benchmark in Insurance Technology: Industry’s First GenAI Assistant Demonstrates Remarkable Business Results
Majesco Copilot Sets New Benchmark in Insurance Technology: Industry’s First GenAI Assistant Demonstrates Remarkable Business Results
Transforming Productivity, Quality, and Customer Experience with Unprecedented Speed
Majesco, a global leader of cloud insurance solutions for insurance business transformation, today announced that Majesco Copilot, the industry’s first and only GenAI assistant, has delivered transformative business results, revolutionizing operational efficiency and productivity while setting new benchmarks in how insurance can be done.
Majesco’s intelligent solutions for P&C and L&AH are engineered to address the intensifying operational demands, operational costs and fight for talent, bending the cost and learning curve for insurers. Leveraging the speed and flexibility of native cloud technology, the power of embedded advanced analytics, and the limitless capabilities of GenAI, Majesco Copilot is enabling insurers to achieve a new level of operational optimization and innovation that has yet to be seen in the insurance industry.
Announcements
Property insurers to benefit from Arturo’s newly launched Change Detection technology
Property intelligence company, Arturo has unveiled a “revolutionary” AI-powered solution for insurers that will enhance property insights and risk management.
The new solution, named Change Detection, leverages state-of-the-art AI and geospatial imagery to pinpoint key changes on properties, such as deteriorating roofs or newly built structures.
This proactive approach empowers insurers to stay ahead of the curve, anticipate risks, optimise coverage, and enhance their policyholders’ experience.
“Arturo’s Change Detection technology allows insurers to make faster, more informed decisions, mitigate risks earlier, and ultimately provide better services to their customers by preventing coverage gaps,” said Marty Smuin, CEO of Arturo. “We are excited to introduce this cutting-edge solution to the insurance industry.”
Key features and benefits of Arturo’s Change Detection technology include comprehensive change detection and real time risk monitoring.
Other benefits include optimised premium management, proactive risk mitigation, and a streamlined underwriting process.
By introducing its innovative Change Detection technology, Arturo continues pushing the boundaries of property intelligence, and empower insurers with robust tools that streamline risk management processes.
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