Commentary/Opinion
Rise in P&C demand in a volatile market draws attention at RVS'24: Swiss Re
Swiss Re expects growing demand for reinsurance protection to be a key topic of discussion at the 2024 Rendez-Vous de Septembre.
As it has been noted, there has been a growing demand for protection in property and specialty lines driven by elevated natural catastrophe risks, macroeconomic instability and politically charged environment
Urs Baertschi, Chief Executive Officer of Property & Casualty Reinsurance, Swiss Re said: “The key topics for the industry remain largely unchanged from last year, but the challenges have intensified, leading to higher demand.
“Faced with elevated natural catastrophe risks, economic uncertainty and geopolitical instability, reinsurance is the natural way for insurers to protect themselves from outsized losses. We are ready to support our clients with our capital, expertise and solutions.”
Higher property values, urbanisation and inflation-driven repair costs are expected to drive demand for property re/insurance, especially in areas with intensifying natural catastrophe risks.
According to the Swiss Re Institute, 2023 was the fourth consecutive year with global insured losses from natural catastrophes above $100 billion, and 2024 is following suit with H1 insured losses already at $60 billion, 62% above the ten-year average.
The EV evolution is going to take longer than we thought
“Welcome to the messy middle of the EV evolution”. Things are likely to remain volatile and unpredictable. And that’s okay.
So, what’s going on? As automakers continue to refine their strategies, offering a more varied mix of vehicles, including hybrids and plug-in hybrids (PHEVs), things are just getting a lot less predictable. A massive spike in leasing could lead to future EV conversions. Meanwhile, charging remains a pretty massive sticking point for a lot of consumers, who are unwilling to drop so much money on a new car if they don’t feel comfortable about their ability to keep it properly charged.
Overall, an additional 35,000 battery-electric vehicles were sold in the first seven months of 2024 as compared to last year, JD Power says. That includes hybrids and PHEVs, which I think gets at the root of the problem. Those who were expecting an even swap — battery-electric for internal combustion — didn’t anticipate the popularity of hybrids in the market. If anything, hybrids are cannibalizing EV sales, giving the pure-battery electric vehicles more competition than anticipated. But in retrospect, it makes sense. What better response to “range anxiety” than a vehicle that, in a sense, operates as an electric vehicle until the battery runs out, and then switches over to gas?
Environmentalists and pure-play EV enthusiasts will decry the “false promise” of hybrids, but that ignores the psychology of most car shoppers. Most people don’t have the luxury to consider environmental impact alone when purchasing what is often the first- or second-most expensive thing they will ever buy. They also have to worry about price and where they’re going to charge it.
Research
P&C rates should still rise but any hardening will be more pronounced in casualty, say respondents to a Monte Carlo Today survey
P&C rates should still rise but any hardening will be more pronounced in casualty, say respondents to a Monte Carlo Today survey
“The reinsurance market is walking a tightrope: balancing rising claims frequency, inflation and the need for sustainable growth while avoiding drastic shifts in rates or terms,” said one respondent to Monte Carlo Today’s pre-renewals season survey 2024.
As Monte Carlo gets underway, key concerns for re/insurance leaders who took the survey focus on property and casualty rates, terms and conditions, and new business opportunities.
These responses highlight the industry’s challenge in maintaining profitability while managing inflation, market capacity, and evolving risks.
Moderation expected
On property reinsurance rates, most respondents expect increases, although opinions differed on the scale, with some 49 percent of respondents expecting rate increases of some description but 38 percent anticipating rate adjustments in line with inflation.
Only 16 percent supported significant hikes above inflation, suggesting a general consensus for market stability and an element of equilibrium with no extreme shift anticipated.
“Rates Should Be Parallel, Or In Line, With Inflation.” But this trend also reflects concerns about rising inflation. One respondent commented: “Rates should be parallel, or in line, with inflation, unless there is a dramatic, geographically large property loss.”
SME Insurance Market to Reach USD 45.60 Billion by 2033; Rapid Growth Expansion of MSMEs to Propel Growth
The global SME insurance market size is anticipated to grow from USD 28 billion to USD 45.60 billion in 10 years. The market will experience rapid growth due to stringent regulatory framework during the forecast period.
The Brainy Insights estimates that the USD 28 billion in 2023 global SME insurance market will reach USD 45.60 billion in 2033. Small and medium enterprises insurance is shortened to SME insurance. SME insurance is intended to shield small and medium-sized businesses against a wide range of risks and dangers. Threats and hazards may result in possible losses of money, property, and life. Small and medium-sized businesses are disproportionately affected because, in contrast to large businesses with deep wallets, they have lower amounts of reserve capital or cushioning.
SME insurance can be tailored to include coverage for every unique component of a certain company. Among the most popular and well-known types of SME insurance are property, liability, and professional indemnity. Property insurance covers the tangible assets of the business, such as its buildings, machinery, supplies, equipment, and other inventories. New insurance categories, such as cyber insurance, have been introduced as a result of the changing nature of risks and hazards.
Travel Insurance Claims Are On The Rise - Here's What Travelers Need to Know
Following a summer marred with travel disruptions and delays, travel insurance claims have risen 21% over last year. With travel up 8% this fall and trip costs continuing to reach record numbers, protecting your trip expenses with travel insurance is more important than ever.
Leading travel insurance comparison site, Squaremouth, reveals 3 of the top reasons travel insurance claims are denied, and how travelers can give themselves the best chance of getting their claim approved.
With fall travel up 8% and trip costs at record highs, protecting your expenses with travel insurance is crucial.
You Were Inconvenienced, Not Interrupted
Travelers often think their insurance will pay out because their trip didn't go as smoothly as they planned. However, in order for a traveler to be covered by their travel insurance, their trip must be disrupted by a circumstance listed in their policy. If the disruption is covered and occurred after they purchased a policy, they can be refunded for out-of-pocket trip payments, as well as additional expenses incurred.
Squaremouth Tip: Don't assume you're automatically covered if anything goes wrong. If you have specific concerns, make sure they are covered by your policy. If you realize your policy falls short of your coverage needs, you may be able to cancel the policy for a full or partial refund.
News
1 in 4 U.S. homeowners is financially unprepared for costs of extreme weather, report finds - CBS News
1 in 4 U.S. homeowners is financially unprepared for costs of extreme weather, report finds
Add tornadoes, wildfires and floods to the already lengthy list worries for U.S. homeowners.
More than a quarter of homeowners (26%) say they are not financially prepared to handle the costs if extreme weather damages their home, according to a new report from Bankrate. Among those polled, 14% reported they are somewhat unprepared and 12% say they are very unprepared, the personal finance site found. The findings come as hurricane season reaches its peak.
People who are "unprepared for that kind of climate risk intersecting with the amount of unknown risk that exists in the country is really alarming in a lot of ways," Dr. Jeremy Porter, head of climate implications research at First Street, a firm that studies climate risk, told CBS MoneyWatch.
The Bankrate survey provides a snapshot of homeowners' financial position in a climate landscape where summers are becoming hotter, hurricane season more active and wildfires more destructive. As billion-dollar climate disasters become more common, homeowners will have to absorb part of the cost via higher insurance rates, weather-proofing strategies and repairs.
In the Bankrate survey, 15% of homeowners said they would not be able to pay their insurance deductible without going into debt if their home was damaged in an extreme weather event.
Geographically, people in the the South (29%) and West (28%) reported the greatest degree of financial vulnerability to extreme weather, the survey found.
AM Best downgrades Farm Bureau P&C Group's ratings on nat cat losses - Reinsurance News
Members of the Farm Bureau Property & Casualty Group have seen a 30% drop in surplus through Q2’24 due to significant catastrophe losses, including a major hailstorm in May and a wildfire in June, leading AM Best to downgrade its Issuer Credit Ratings.
Declining reinsurance profitsAs a result, key balance sheet strength metrics have weakened and no longer align with the strongest assessment, prompting a downgrade from “strongest” to “very strong.”
AM Best downgraded the Long-Term Issuer Credit Ratings from “a+” to “a” and affirmed the Financial Strength Rating of A for both Farm Bureau Property & Casualty Insurance Company and Western Agriculture Insurance Company, collectively known as the Farm Bureau Property & Casualty Group. The outlook for these ratings has been revised from stable to negative.
The negative outlook reflects the significant volatility in the group’s operating results in recent years and ongoing pressure on its balance sheet strength.
Since 2022, severe weather events and adverse reserve development have led to high combined ratios and substantial operating losses.
If these operating performance trends continue, the group may fall further out of alignment with other adequately assessed companies.
InsurTech/M&A/Finance💰/Collaboration
Mitchell Expands Its Intelligent Open Platform and Support for AI-Enabled Vehicle Inspections Through Collaboration With PAVE
Mitchell, an Enlyte company and leading technology and information provider for the Property & Casualty (P&C) claims and Collision Repair industries, today announced that it is teaming up with PAVE to automate vehicle inspections and conditioning.
Using Mitchell’s cloud-based appraisal solution, comprehensive data and open platform with PAVE’s proprietary artificial intelligence (AI) and guided image capture application, U.S. and Canadian organizations will be able to generate graded condition reports from uploaded photos. These reports will identify the vehicle damage and include estimated costs for parts, labor, repair or replace operations, and regional taxes.
“PAVE has developed an advanced, AI-powered solution for virtual vehicle inspections,” said Steve Southin, co-CEO and founder of PAVE. “By joining forces with Mitchell, a leader in collision estimating technology and repair data, PAVE will be able to provide our customers with complete and consistent damage appraisals—arming them with the information needed to effectively run their businesses.”
PAVE will be the latest AI innovator to integrate its machine-learning and computer vision models with the Mitchell Intelligent Open Platform, which powers the company’s full suite of intelligent solutions. Designed to provide flexibility and scalability, the platform enables organizations to use Mitchell’s technology with their own AI, Mitchell Intelligent Damage Analysis, or AI developed by a best-in-class, third-party provider.
Top insurtech funding rounds, August 2024
There were about 35 funding events in the insurtech sector between August 1 and August 31, 2024, according to a review by Digital Insurance. What follows is a selection of these, focusing on those in the insurtech and property & casualty sectors that are part of the venture-capital financing model. (Other funding events, such as private-equity infusions, are included in the overall count.)
A portion of the data was sourced from Crunchbase. Other information, including quotes from investing VCs, comes from company announcements. For our previous edition, which covered the month of July, click here. These updates will continue monthly.
Financial Results
US private auto insurers' premiums rise to record levels after strong Q2 2024
Private auto insurers in the US continued to benefit from earned-in rate increases, pushing premiums to record levels in the second quarter of 2024.
Insurers recorded direct premiums written (DPW) of $86.87 billion during the quarter, the highest second-quarter total since 2001, according to an S&P Global Market Intelligence analysis. This marks an $11.34 billion increase from $75.53 billion a year ago.
The private auto sector recorded $167.6 billion in direct premiums earned in the first and second quarters, Market Intelligence data shows. The sector accounted for 34.6% of the industry's direct premiums earned in the first half of 2024, according to research from Market Intelligence.
Loss ratios for the sector also showed dramatic year-over-year improvement. The industry ratio fell 9.81 percentage points to 68.33% from 78.14% in 2023 and also beat the ratio of 78.38% seen in 2022.
State Farm Mutual Automobile Insurance Co. remained the market leader as it booked premium growth of over 20% for the sixth consecutive quarter. The Bloomington, Ill.-based carrier had a 20.1% year-over-year increase in DPW in the quarter to $16.64 billion, representing a 19.2% market share, a 0.9-percentage-point increase from 18.3% a year ago.
The Progressive Corp., which had another quarter of solid growth in policies in force (PIF), maintained the second spot in the analysis with a 16.1% market share as it posted the biggest increase in DPW by percentage in the top 10. The Mayfield, Ohio-based insurer recorded $13.99 billion in premiums in the quarter, a year-over-year increase of more than 26% from $11.1 billion a year ago.
Berkshire Hathaway Inc.'s GEICO Corp. and The Allstate Corp. posted slight decreases in their market shares, though they maintained the third and fourth positions, respectively. GEICO's market share dipped 0.4 points year over year to 11.7% from 12.1% on DPW of $10.2 billion, while Allstate's market share of 10.1% on DPW of $8.8 billion was a 0.2-point dip from 10.3% the previous year.
United Services Automobile Association (USAA) rounded out the top five with a 6.1% market share on DPW of $5.28 billion, a 14.1% year-over-year increase.MORE
Legal System Abuse/Social Inflation
Swiss Re says social inflation exceeds economic inflation, in growing US liability claims - Artemis.bm
According to global reinsurance giant Swiss Re’s Institute, the rate of social inflation is exceeding economic inflation in growing US liability claims and this has potential ramifications for catastrophe contracts, as the reinsurer explains social inflation can manifest in property natural catastrophe insurance.
At its current rate of growth, social inflation is now emerging as the main driver behind rising US liability claims, Swiss Re says.
This is leading to underwriting losses, heightened uncertainty and reduced insurance capacity for businesses across the world.
There are also signs of social inflation impacting the UK, Australia and Canada due to an expansion of mass-tort claims, which is a trend the reinsurer believes is likely to spread to EU countries as well.
The Swiss Re Institute‘s new Social Inflation Index shows that because of arising number of large court verdicts, social inflation increased liability claims in the US by 57% in the past decade and hit an annual peak of 7% in 2023.
Third-party litigation funding is a factor driving court awards higher, as third-party investors back litigants and law firms, resulting in higher compensation, especially for bodily injury claims, Swiss Re highlights.
Jérôme Jean Haegeli, Swiss Re’s Global Chief Economist, said, “Unlike economic inflation, there is no sign of social inflation abating. Litigation costs are rising and are now the key driver of liability claims. With businesses around the world facing rising legal defence costs, the cost of providing liability insurance has surged, particularly in the US, with the burden borne by consumers. Given these unsettling developments, we quantify the cost drivers in excess of economic inflation with our new social inflation index.”
Canada
U.S. insurer enters Canada with affluent homeowners' insurance, to offer auto in 2025
U.S. property and casualty insurer PURE Insurance has expanded into Canada with home insurance for affluent homeowners whose properties are worth between $2 million and $100 million.
Privilege Underwriters Reciprocal Exchange (PURE) announced its first international expansion outside of the U.S. on Monday with the launch of a Toronto office that will begin offering home insurance policies to Ontario residents this month, PURE said on its website, quoting a Globe and Mail article.
The company will also introduce auto insurance for the province in early 2025, “with planned expansion to other provinces in the future,” the insurer says in a press release. “This move introduces PURE’s unique reciprocal model to high-net-worth Canadians, starting in Ontario.”
PURE is a policyholder-owned reciprocal P&C insurer operating through select brokers. “This member-owned model incentivizes PURE to charge the right price, not the highest, and to deliver exceptional solutions and service to members.”
Events
ITC Vegas 2024 - The world’s largest gathering of insurance innovation
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