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    Home»Property»E&S Property Insurance Market Sees Unexpected Market Softening in H1 2024
    Property

    E&S Property Insurance Market Sees Unexpected Market Softening in H1 2024

    August 28, 20244 Mins Read


    The excess and surplus lines property insurance market defies 2023 predictions, with rate decreases gaining momentum, according to Risk Placement Services.

    commercial real estate

    The excess and surplus (E&S) lines property insurance market experienced a significant shift to a softer market in the first half of 2024, with a steady decline in rates and competition for market share defying expectations heading into the year, according to Risk Placement Services’ (RPS) “2024 Q3 State of the Property Market” report.

    “What’s interesting about 2024 is that, when we ended 2023, we all predicted a much more competitive and stable market to guide the narrative of 2024. What we’ve gotten thus far is a lot of inconsistency and opportunistic underwriting by many of the major markets,” James Rozzi, area executive vp for RPS, noted in the report. “We’ve also seen carriers fight hard to grow, retain business and increase capacity where they can in order to maintain market share. This behavior has quickly propelled us into a buyers’ market that’s created a much-needed reprieve for insureds and a lot of frustration among insurance carriers with deteriorating market conditions.”

    The E&S property market has offered clients rate reductions in most geographies and asset classes in 2024, following record-breaking profits in 2023, the report stated.

    In the first half of the year, rate reductions averaged between 5% and 12.5%, RPS reported. Some accounts, having been completely restructured, saw property rate decreases “well above” 25%, according to the report. While flat renewals and slight increases are still occurring, flat to slightly down is the prevailing experience for property rates, RPS stated.

    While many E&S carriers are balancing between market discipline and growing market share, Rozzi noted that “carriers also have a lot of perspective about how much rate came back into the market the preceding five years, and data certainly demonstrates that carriers can afford to give back a few points and still have an adequately priced account on their books.”

    Navigating the Fragile Market Ahead

    An active and potentially record-breaking North Atlantic hurricane season could upset the property market’s current stability, RPS stated.

    “The market, while stable and competitive, is very fragile. Many insurance veterans feel that we’re a major storm or CAT event away from reversing the current trend, and the outcome of this year’s hurricane season is going to have a significant impact on how 2024 ends and 2025 begins,” according to Rozzi.

    The RPS report provided an in-depth look at various market segments:

    • In the Named Windstorm (NWS) CAT Aggregate segment in Florida and Tier 1 Wind areas, increased capacity and market supply have led to rate reductions of 7.5% to 17.5%, the report stated.
    • Despite increasing replacement costs that hit property insurer results in recent years, the market has not seen a widespread increase in property valuation adjustments, RPS stated.  “Part of the reason for a more relaxed approach is that many clients increased their values anywhere from 25% to 40% up over the past few renewal cycles, and many feel their values are at a level they can justify,” the report noted.
    • The wood-frame construction market remains healthy, with competitive rates down 10% to 15% year-over-year for most projects, particularly in low-crime areas.
    • The CAT Aggregate for Earthquake (EQ) segment has seen rates decrease by 2.5% to 10%, with this trend expected to continue, according to the report.
    • In the multi-family sector, rates have been flat to down 20%, depending on factors such as losses, geography, deductibles, and CAT limits. Clients with profitable partnerships and controlled losses have experienced a broadening of terms and conditions, RPS noted.

    As the E&S property insurance market navigates these varied conditions, industry professionals remain cautiously optimistic, closely monitoring the impact of the continued hurricane season on the property insurance landscape.

    “Even if the hurricane season ends up being quiet or less impactful to the marketplace, I still think that carrier discipline will prevent the market from going into free-fall mode,” Rozzi stated. “It’s important to remember that carriers are using artificial intelligence, better data, enhanced models and a lot of other tech-driven underwriting tools to help them determine what premium to charge for risks they want to keep and when it’s best to walk away.”

    Read the full report here. &





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