Looking Ahead: A Guide to Property & Casualty Risk Management and Insurance in 2024

Inflation and rising reinsurance costs due to severe weather events continue to impact property insurance costs. However, we predict property and casualty (P&C) buyers should see only single-digit percentage increases in 2024—similar to what they’ve seen this year.

In our annual P&C Looking Ahead Guide, our property and casualty specialists discuss the factors they expect will shape 2024 trends. They also provide insight into expectations for their industry segments, including steps to take to mitigate rate increases.

Here are some of the highlights from the Guide

Commercial Lines Forecast for 2024

As we forecasted at this time last year, the rates for most commercial lines segments increased throughout 2023, albeit at a slower pace than in 2021 and 2022.

We expect 2024 to look like 2023 for the P&C segments of the commercial lines market, with single-digit percentage increases. Commercial insurance buyers who remember 10 years ago when rate decreases occurred every year are likely asking, “Is this a new normal?” The answer depends on trends in the following three factors.

• Inflation. The combination of decelerating inflation and higher investment portfolio yields will improve insurer results, which should result in more favorable premiums but that will likely not materialize until later in 2024.
• Climate and catastrophic loss. Expect insurers to place greater scrutiny on resilient building materials and construction practices.
• Reinsurance. Reinsurers have responded to catastrophic events by increasing premiums, adding more restrictive terms and conditions, and requiring insurers to retain more catastrophic loss.

Property Update: Reinsurance Upends the Market

Prior to the end of Q3 2022, the property market appeared to be stabilizing. That all changed when Hurricane Ian made landfall in Florida in September 2022, resulting in damage exceeding $112 billion. In December 2022, winter storm Elliott literally blew the roof off the property market, producing an even greater impact on the reinsurance market.

Contributing to the challenges in the property market is valuation. Some insureds have not been proactively increasing replacement cost values, and when large industry losses occur, it has a negative impact on the entire industry.

Another factor is determining the appropriate coverage and premium amid an ever-changing catastrophe landscape. The increase in catastrophic events combined with increases in values and increases in retained risk (via reinsurance retentions increasing) has led to carriers reducing catastrophe limits, increasing deductibles, and charging significantly more premium.

       Source: NOAA National Centers for Environmental Information

If we can finish 2023 with no major industry events, we expect a stabilization of both coverage and rate increases in 2024.

Get a detailed update on the property market, including steps to take for better renewal outcomes, on page 9.

Casualty Update: Workers’ Comp Driving Results for Insurers and Renewal Strategy for Businesses

At the end of 2022, the liability insurance market seemed to be softening, bolstered by improvements in underwriting results for commercial auto and general liability. Insurers competed aggressively for business recently considered undesirable, and rate increases began to slow. A year later, the hard market for primary liability is back.

Litigation activity, which slowed during the pandemic, has boomed, backed by an increasingly aggressive plaintiffs' bar and deep-pocketed litigation financiers. Our best advice is to leverage workers’ compensation (WC), which continues to be a stable source of insurer profits and a growth target for essentially every casualty market.

Commercial Auto: Expect Modest Rate Increases

Insurers will demand increased rates, with organizations using fleets of heavy autos or large hired/non-owned exposures (such as delivery operations) bearing the largest price increases. We anticipate modestly higher rate increases of +6% to +9% in 2024.

Commercial General Liability: More Frequent Large Claims

Expect rates to increase slightly faster in 2024, with the greatest pricing impact borne by the toughest risks: manufacturers of tough products (e.g., kids' goods, auto or medical parts, and chemicals), habitational real estate owners and operators, sharing economy firms (on-demand delivery services and home sharing), and companies with material wildfire exposure (utilities and forestry concerns). We anticipate rate movement of +3% to +8%.

Umbrella and Excess Liability: A Market on the Edge

The umbrella/excess liability market presents two different challenges depending on the insurance layer in question.

Lead umbrella layers continue to experience material rate increases due to increased frequency of large losses and limited insurer competition. Umbrellas tend to be the lowest layer on the tower with limits of $5 million or more exposed. For large companies (revenues of $1 billion+), we anticipate rates of +7% to +15%. For small commercial and middle-market firms (less than $1 billion), we anticipate rates of +4% to +10%.

There is a developing threat to the improving picture for excess casualty coverage. A handful of liability risks are emerging that present the potential for costly class action litigation, prompting underwriters to raise rates and restrict coverage for certain businesses. For large companies (revenues of $1 billion+), we anticipate rates of +4% to +10%. For small commercial and middle-market firms (less than $1 billion), we anticipate rates of +2% to +8%.

Workers’ Compensation: Potential for Rate Reductions

Worker’s compensation (WC) remains the most consistent source of profits for casualty insurers. The combined ratio for private WC insurers was 84% in 2022, the sixth straight year with a combined ratio below 90%, according to the National Council on Compensation Insurers (NCCI).

For 2024, we anticipate rate movement of -5% to +1%.

For information on how to leverage your workers’ compensation programs for optimal pricing on your casualty programs, see page 17 of the Guide.

Industry Insights

Our subject matter specialists in different industries also provide their takes on rate changes in 2023, the context behind these trends, and their projections for 2024. We cover the following industries:

• Healthcare professional liability: Stable market with ongoing rate pressure
• Life sciences: Expect continued market stability
• Technology: Tech companies continue to see reduced rates
• Construction: Rate consistency amid rising challenges
• Real estate: Unprecedented challenges for the real estate market
• Manufacturing and food processing: Managing risk and cost containment

See page 26 of this year’s Guide to learn more about rate trends and market expectations for these industry segments.

We Untangle, Advise, and Solve for You

With our expertise in loss control, risk mitigation, alternative risk funding, and cost-of-risk analysis, Woodruff Sawyer can help you navigate the complexities of P&C insurance, ensuring your programs are well-priced and carefully tailored.

For more analysis and predictions for the market in 2024, get the full P&C Looking Ahead Guide