Challenges for Large Insurers in FY24

Marsh US casualty rates rose 8% in the first quarter, contributing strongly to a 4% global increase. Due largely to the severity of claims and large jury verdicts — sometimes called "nuclear verdicts” — available capacity tightened, with underwriters continuing to reduce their line sizes. • Workers’ compensation continued to be the primary casualty line of interest for most insurers for reasons including strong historical profitability and stable performance; however, concerns continued regarding increasing reserves and rising medical costs. • Auto liability continued to pose challenges for insurers due to larger jury verdicts nationwide and rising repair costs. • General liability rates remained relatively stable, with average increases of approximately 2%. • Loss activity in certain industry classes — including real estate, hospitality, and public entities — drove larger increases. • Coverage restrictions continued to increase, including per- and polyfluoroalkyl substances exclusions, biometric restrictions, and #cyber exclusions, with real estate and hospitality organizations seeing additional exclusions related to sexual abuse, human trafficking, and assault. • In the umbrella and excess liability market, risk-adjusted rates increased 16% compared to 15% in the prior quarter. • Rates for lead umbrella programs with favorable loss experience and low-hazard exposure trended higher by 12% to 15%. • Clients with adverse loss development typically experienced changes to limits, attachments, coverage, and/or pricing, with rate increases exceeding 30%. • Insurers continued to reduce limits; four London insurers closed down in 2024 and new capacity has been limited. Some high excess insurers raised the minimum price per million to $10,000, affecting umbrella and excess tower pricing. • Insurers shifted away from concentrating capacity on single towers due to increased frequency of severe claims. • Concerns increased regarding adverse outcomes seen as tied to third-party litigation funding in the US court system. • Frequency and severity of auto liability claims increased across all business classes and vehicle types. Some insurers raised auto attachment points for fleets over 100 units, especially in higher risk states. Third-party hauling contributed to adverse auto liability loss development. • General and product liability claims showed higher severity trends. Premises exposures are leading to large verdicts, adding pressure to pricing programs already strained by auto and product liability issues. https://lnkd.in/eNYbXAFs

Insurance has always been our quiet protector : boring, stable, invisible. But Global Insurance Market Report 2024 reveals a sector at a dangerous crossroads. Assets have climbed to $42T, liabilities to $36T. Solvency looks stable, yet rising interest rates are driving policyholders to surrender policies for better returns, testing liquidity buffers in ways that could destabilize. Life insurers are chasing yield in private credit, equity, and securitisation, some exposures now top 10%. At the same time, cross border reinsurance deals are transferring longevity and investment risks, concentrating fragility in the hands of a few global reinsurers. Climate change is no longer a distant threat. Up to 45% of insurer assets are climate linked, while natural catastrophe losses are intensifying. Though 68% of insurers use scenario analysis, even supervisors admit it is not enough. Protection gap is widening, threatening affordability and access. Reinsurance premiums have crossed $900B, with declining retention ratios showing insurers’ growing dependence on fewer players, raising concentration risk. Meanwhile, IFRS 9/17 has pushed more assets into hard to value categories, increasing systemic risk scores by 5.3%. Still lower than banks, but trajectory is concerning. Insurance must evolve into a true stabiliser: with smarter asset liability management, responsible AI adoption, global cooperation on climate risk, and tighter guardrails around reinsurance. Because real question is no longer whether insurance will survive, but whether it will protect society or quietly magnify its next big crisis. Refer attached report for detailed insights. ⬇️ #Insurance #Insurtech #ClimateRisk #Reinsurance #FinancialStability #RiskManagement #IFRS #InsuranceInnovation

In recent years, there has been a significant increase in natural disasters, resulting in substantial financial losses exceeding $100 billion for four consecutive years. Even in 2023, which was considered a relatively quiet year for tropical storms, there were a record-breaking 37 events, each costing at least $1 billion in losses. This situation raises concerns about the role of the insurance industry in managing and mitigating such losses, as well as the sustainability of the traditional insurance model to a transformative model. The insurance industry's outdated risk assessment models may have failed to keep pace with the accelerating impacts of climate change. The reliance on historical data and the short-term nature of insurance policies have led to an underestimation of the risks posed by extreme weather events. As a result, insurers have been forced to raise premiums, reduce coverage, or withdraw from high-risk areas altogether, leaving vulnerable communities in need of more protection. This approach is not sustainable in the long run. By integrating climate risk considerations into their underwriting and investment strategies and using innovative financing, insurers can incentivize companies to adopt more sustainable practices and accelerate the transition to a low-carbon economy. The threat of an "uninsurable world" caused by climate change is a stark reminder of the urgent need for action. The insurance industry must adapt and evolve to meet the challenges of our changing climate, embracing a long-term, collaborative, and sustainable approach.

The iconic insurance tagline "Sar utha ke jiyo" once symbolized dignity and security. But today, rising medical costs, growing claim disputes, and escalating premiums are making policyholders question the value of insurance. A recent LocalCircles survey, covering over 100,000 people, revealed that nearly 50% of health insurance claimants faced issues such as rejections or long delays. Disillusioned by poor claim experiences and affordability concerns, many are reducing coverage or abandoning policies altogether. IRDAI data highlights a troubling trend—claim rejections in FY24 rose to ₹26,000 crore, up 19% from the previous year. While insurers and hospitals are mandated to process cashless discharges within an hour, 60% of patients reportedly waited 6–48 hours. Errors in paperwork, missed disclosures, and lack of documentation are key reasons for claim denials. Young, healthy individuals are increasingly opting out, while the elderly face soaring premiums compounded by an 18% GST, making insurance feel like a luxury. Experts argue that this tax—especially on essential policies like health and term insurance—is a major deterrent. There are growing calls to either exempt these policies from GST or reduce it to 5%, similar to global practices. IRDAI’s grievance data reveals over two-thirds of non-life insurance complaints stem from claims issues. Even life insurance saw over ₹1,000 crore in rejected claims due to basic documentation lapses. Until premiums become more affordable, claims more transparent, and taxes more rational, India’s insurance safety net may continue to unravel—leaving consumers reliant once again on personal savings for security. #policyholder #Healthinsurance #claimrejections #claimdelays #trust #risingpremiums https://lnkd.in/dbbcj6_k

Looking for a breakdown of the US P&C insurance market? If so, you’ve come to the right place. This article saves you hours of research by bringing together the most important insights from earnings calls, financial statements, and industry reports. The industry’s full-year 2024 combined ratio was 96.9%. The big themes were catastrophic losses, casualty lines severity, and expense pressures. Severe weather drove billions in insured losses. Hurricane Helene, the California wildfires, and Midwest flooding hit insurers hard. The Francis Scott Key Bridge collapse became the largest marine insurance loss in history. Social inflation pushed casualty lines severity higher, driven by rising jury awards and increased attorney involvement. Many insurers reported favorable prior-year reserve development, while others strengthened reserves in response to elevated casualty lines severity. Technology investment ramped up as AI, cloud platforms, and automation became critical for efficiency and cost control. Major personal lines insurers were profitable, with results driven by rate actions, expense discipline, and improved underlying loss experience. Commercial insurers maintained profitability through targeted renewal pricing, risk selection, and policy restructuring. Casualty reinsurance markets tightened, making coverage harder to secure. Specialty insurers found opportunities in admitted market dislocations and favorable pricing conditions. Retention strategies became a priority as companies worked to balance rate actions with keeping policyholders. Capitalization remained strong, with insurers growing book value and returning capital to shareholders. Reduced capacity in catastrophe-prone areas is making coverage unavailable, and in some cases, prices are making insurance unaffordable. If this trend continues, more risks will shift to government-backed programs, residual markets, and self-insurance, creating broader economic concerns. Balancing society’s need for coverage with publicly traded insurers' accountability for shareholder returns remains one of the industry's biggest challenges. If you work in P&C insurance, what’s been top of mind for you lately? Full article here. ⬇️ #actuarialscience #riskmanagement #insurance #careers #themaverickactuary

“Can the financial sector cope with a changing climate?” | Inevitable climate change-related shocks require the insurance industry to evolve its value proposition to remain relevant   Many prominent business publications detailed the links between the insurance industry’s distinctive financial risk protection solutions and the increasing frequency and severity of climate change-related shocks in 2024. This trend has continued in 2025 and will expand as climate change causes insurability challenges for households, businesses and governments across the world. The Financial Times (FT) has been at the forefront of these analyses, including this article from last Friday. A quote illustrates what these insurability problems mean in practice: “when her insurer pushed her annual insurance premium up to nearly USD 12,000 in the aftermath of Hurricane Francine, she was left wondering whether to leave Louisiana. But the soaring coverage costs have also depressed the value of her home, which is her main financial asset, leaving her unable to consider a sale.” The FT article presents contrasting views on what we might extrapolate from this personal story. First, “While some regulators have continued to warn that extreme weather could trigger market panic, others are less convinced that climate change will be systemically significant, particularly since financial institutions have retreated from high-risk areas, shifting costs to governments and individuals.” Second, from a recent study linked below, “Economists at NYU Stern, Rice University, and the Federal Reserve Bank of Dallas found that rising insurance premiums have prompted higher rates of mortgage delinquency and are pushing homeowners to rack up more credit card debt, among other “far-reaching ripple effects” that higher insurance costs could have on the financial sector.” A related New York Times piece examined how climate change might affect the availability of insurance and the effect on the real economy: “Without insurance, banks won’t issue a mortgage; without a mortgage, most people can’t buy a home. With fewer buyers, real estate values are likely to decline.” What might this mean for the insurance industry? Simply, if the probability of a risk occurring rises to a level where it is not economically feasible for (re)insurers to offer financial risk protection, then it’s clear that climate change presents an existential threat to many parts of the insurance value proposition. To remain relevant, the industry must evolve. It must leverage its risk management data, knowledge, and expertise to help households, businesses, and government better understand the risks they exposed to and inform risk prevention, reduction, preparation, and management efforts. The FT article concludes with a sharp summary of where things stand from the lead author of the study referenced above: “The risk is out there. It’s not going away.” #sustainability #sustainabledevelopmentgoals #sdg13 #insurance #innovation