The U.S. property & casualty insurance industry is entering 2024 with “strong momentum," according to Swiss Re's latest U.S. P&C Outlook, which is overall “decidedly more favorable than 2023, with expected strong premium growth and easing inflation pressures."  

The report signaled that, although some way off, an end to the hard market is in sight. Rising premiums are adding to company stability but clients should not expect any relative rate relief until 2025. In the report, Swiss Re raised its industry premium growth estimate for 2024 to 7%—higher than its 5.5% estimate last year—and forecasts 4.5% premium growth in 2025. 

Despite years of inflation and severe weather, personal lines—led by personal auto—is expected to see its combined ratio drastically improve as a result of premium growth. Swiss Re also expects loss severities to ease as “average inflation declines to our forecast [of] 2.7% in 2024 and 2.4% in 2025," the report said. “This sets the stage for improved underwriting results, as rate gains outpace claims costs." 

While actuaries at the Insurance Information Institute (Triple-I) and Milliman projected the 2023 net combined ratio for the property & casualty industry to be 103.8, Swiss Re forecasts the industry net combined ratio at 98.5% in both 2024 and 2025. “Personal lines will be the key positive driver," the report said, noting that as personal lines margins improve due to decreasing severity and higher rates, the industry return on equity is forecast to be 9.5% in 2024 and 10% in 2025. 

Both personal auto and homeowners premiums grew in excess of 13% through the third quarter of 2023, driving a 9.9% growth while personal auto rate increases exceeded 9% in each of the six months through November 2023, the report said. In contrast, commercial lines rate increases are decelerating, the report said. However, commercial property rate growth will remain in the “high single digits." Additionally, in response to strong underwriting results, liability premiums were largely flat in 2023 and some are declining, with the exception of umbrella and commercial auto. 

Meanwhile, MarketScout's year-end report concluded that the U.S. commercial insurance buyer paid a slightly lower premium on average in 2023 than in 2022. In the third quarter, rates were up 3.72%, but in the fourth quarter, rates increased to 5.6%, resulting in a total rate increase for the whole of 2023 of 4.56%. 

“Calendar year 2023 settled down a bit as compared to the last few years," said Richard Kerr, CEO of Novatae Risk Group. “Property insurers are still cautious, but they are optimistic 2024 could yield good returns, especially with the rate increases of the last several years. Throughout 2023, liability insurers assessed sensible rate increases." 

Insurance companies made it through 2023 better than expected, MarketScout said. The composite rate increase for personal lines insurance across the U.S. was 4.75% for the fourth quarter and 4.61% when examining the entire 2023 year. 

“We continue to see the largest composite rate increases in homes over $1 million in Coverage A value, most likely because this includes all of the large homes in catastrophe-exposed locations," Kerr noted. “While the composite rate for large homes was 5.9% for 2023, some homeowners in tough areas or with prior losses are experiencing rate increases as high as 50%." 

Homes under $1 million in Coverage A value averaged a rate increase of 4.32% for 2023. Auto insurance came in at 5% and personal articles at 3%. 

Will Jones is IA editor-in-chief.