Market Overview: The Midwest’s commercial property and casualty (P&C) insurance market remains in a “Hard Market” phase through 2024, but there are growing signs that market conditions may begin to ease by 2025. Premiums and rates continue to rise, creating challenges for businesses, non-profits, and municipalities seeking affordable coverage. Insureds are also likely to encounter more restrictive coverage terms and conditions.
Swiss Re’s US Property & Casualty Outlook for 2024 & 2025:
- 2024: U.S. commercial P&C insurance premiums are projected to grow by 5.5%. The growth rate is expected to slow compared to 2023 (7.5%), driven by a moderation in factors like inflation and demand for coverage.
- 2025: The market is expected to stabilize further, with premium growth forecasted at 5%, driven by a softer claims environment and increased competition among insurers.
The Council of Insurance Agents and Brokers (CIAB) Q2 2024 P/C Market Survey:
- Premium increases averaged 5.2% across all account sizes, down from the 7.7% seen in Q1 2024, marking the 27th consecutive quarter of increases.
- Medium-sized accounts experienced the sharpest slowdown in premium growth, with a 5.1% increase, down from 8.5% in Q1.
- Commercial Auto led the lines with the highest increase, up 9.0%, while commercial property saw an average 8.9% increase. This is a slight easing from earlier in the year.
- Four lines of business, including Workers’ Compensation, Cyber, Directors & Officers (D&O), and Employment Practices Liability, saw average premium decreases, largely due to increased capacity in these markets.
Driving Forces Behind the Rise in Premiums: Several factors continue to drive the rise in commercial P&C premiums in the Midwest:
- Inflation and Rising Costs: While inflation is moderating, its impact is still being felt in 2024. Increased costs for materials, labor, and medical care continue to push up claims expenses for insurers, particularly for lines like Commercial General Liability and Workers’ Compensation where these costs are key claim drivers.
- Increased Risk Exposure: Climate shifts, population growth, and economic expansion across the Midwest elevate the region’s risk profile, driving higher claims and premiums. This is especially pronounced in Commercial Property insurance, where the values of insured properties and the potential for weather-related losses are increasing.
- Cyber Threats: As businesses face mounting cyber risks, the need for comprehensive cyber liability coverage continues to increase, impacting the market. The increasing sophistication and frequency of cyberattacks, coupled with growing regulatory scrutiny on data security, are driving demand for this critical coverage.
- Climate Change: Extreme weather events in the Midwest remain a significant factor, driving up claims and necessitating enhanced coverage solutions. This is particularly relevant for property insurance, where coverage for floods, windstorms, and other severe weather events is becoming increasingly important.
Outlook for 2025:
As the rate of increase in claims costs slows down and competition among insurance companies grows, we expect premiums to level off. Insurers are likely to shift their focus toward generating returns on investments, rather than relying heavily on raising rates or improving their risk assessments to boost profits. Forecasts suggest that commercial property and casualty premiums will grow by around 5% in 2025, indicating a potential softening of the hard market. This trend may be especially noticeable in areas like Cyber and Directors & Officers (D&O) insurance, where more companies are entering the market and competition is returning.
However, the recent impact of Hurricanes Helene and Milton could affect this outlook, particularly in property insurance, where higher-than-expected losses may drive up premiums in catastrophe-prone regions, delaying the expected stabilization.
What Midwest Insureds Can Do:
Given the ongoing hard market and the potential for relief in 2025, businesses, non-profits, and municipalities should consider the following strategies:
- Work with Henriott: As a trusted insurance broker, Henriott can help you assess your risk profile and find appropriate insurance solutions with coverage limits and deductibles tailored to your financial goals and risk tolerance. We can help you navigate the complexities of the market and identify the most cost-effective coverage options for your specific needs, whether it’s securing adequate Business Interruption coverage, managing your Umbrella liability limits, or finding competitive options for Professional Liability insurance.
- Explore Alternative Risk Financing: Consider self-insurance or captive insurance as viable options to manage risk and reduce overall insurance costs. These solutions may provide long-term savings, especially in the face of rising premiums.
- Mitigate Risk: Take proactive steps to reduce risk exposure through loss prevention measures and business continuity planning. Henriott’s risk management services can help identify key initiatives to lower your Total Cost of Risk (premiums + retained claims + cost of risk management efforts + residual risk).
- Budget for Continued Premium Increases: Even with effective risk management strategies, premiums are likely to remain elevated in 2024. Ensure your budget accounts for these ongoing increases. However, keep in mind that market conditions are expected to ease in 2025, with premium growth slowing to 5% and potentially even declining in some lines of business.
- Stay Informed: Keeping up to date with the latest insurance trends via the Henriott Hub will help you make more informed decisions about your insurance and risk management strategies.
Conclusion:
The Midwest commercial P&C insurance market continues to face challenging conditions in 2024, including rising premiums, inflationary pressures, and increasing climate risks. However, signs point to a potential easing of the hard market by 2025, barring significant impacts from recent events like Hurricanes Helene and Milton. Henriott is fully prepared to assist clients in navigating these complexities, providing tailored coverage solutions and proactive risk management services that meet the unique needs of businesses in this region. With a deep understanding of local risks and market dynamics, Henriott remains your trusted partner in maintaining resilience and protection as market conditions evolve.
For contact:
Zach Finn, Director of Risk Management (765) 429-5001 | zfinn@henriott.com
- Swiss Re Institute. US Property & Casualty Outlook: Dog Days Are Over. Swiss Re Institute, June 2024
- The Council of Insurance Agents & Brokers. Commercial Property/Casualty Market Index, Q2 2024. The Council of Insurance Agents & Brokers, 2024
- Howard, L.S. “Hard Market Conditions Expected to Ease in 2025 as Claims Inflation Softens: Swiss Re.” Insurance Journal, July 18, 2024. https://www.insurancejournal.com/news/international/2024/07/18/784498.htm
For more information about Henriott Group, visit www.henriott.com.
About Henriott Group
Henriott is an independent Risk Management firm dedicated to helping clients prevent, manage, and recover from critical incidents. We serve both public and private entities, offering expertise in risk management, risk financing, commercial insurance, employee benefits, crisis management, contingency planning, and crisis response.
CONTACT
Grace Pritchett, Communications (765) 838-8610 | gpritchett@henriott.com
