Sponsored Content by Risk Strategies
The State of the Insurance Market: What’s in Store for 2025
The market is always changing. As Q4 2024 comes to an end, it’s high time insurance professionals start thinking about what the upcoming year has in store, both in terms of challenges and in opportunities.
This proactive approach can set up any business for success.
“Proactive risk management and strategic planning are at the core of fostering business resilience,” said John Scroope, National Director of Retail Operations, Risk Strategies. “Looking at what experts in specialty practices and product lines have to say about the market challenges, certain lines and their stability moving forward, aids clients in staying ahead of risk.”
Risk Strategies has released its State of the Insurance Market report, wrapping up some of the key trends of 2024 and providing a look into 2025.
Below is an overview of the report, highlighting key insights into individual sectors and top considerations for insurance professionals moving forward.
Key Observations
Perhaps most notably, the report reviewed market challenges being faced by each industry. It’s no surprise that catastrophic property loss and auto lines bring considerable challenge to the market as historic loss levels continued to plague 2024.
“This situation affects the availability of insurance and affordability for clients,” said Scroope.
Catastrophic events have also been linked to inflation and rising costs, including interest rates and supply chain issues, which further impact overall insurance costs.
There is a silver lining, however, as we move into 2025.
“Despite challenges, some insurance lines such as management liability, cyber and workers’ compensation remain stable,” said Scroope. “These areas have adequate capacity and consistent rates, particularly for organizations with effective risk management strategies in place and good risk profiles.”
Many factors impact risk. Medical costs and claims are one of them.
The Risk Strategies report noted an upward trend in claims costs, driven by economic factors and social inflation — which are further driven by higher litigation costs and nuclear verdicts.
“Employers also face rising medical expenses, which affect employee benefits programs and require more customized approaches,” Scroope said.
Highlights by Industry
The report took a deeper look at different industries’ market conditions, coverage considerations and rate forecasts. From agriculture to transportation, fine art to health care, the report provides insurance professionals with a good look at current trends and some things to prepare for in 2025.
In agriculture, profit margins continue to narrow for the second year in a row, diminishing returns in ag production. Looking ahead into 2025, it’s clear that insurance agents must be qualified and equipped to properly value all insurance and farm bill options.
Aviation has seen dramatic changes over the last several years, though rates are stable today. This has allowed for more capacity broader coverage and increased limits—all good news for the space.
“While rates continue to stabilize, the aviation underwriting market is becoming more competitive … with more competition, there is more capacity and lucrative opportunities for newcomers in the aerospace industry,” per the report.
In terms of higher education, the report predicts the major business and insurance issues of 2024 will continue to impact institutions into 2025.
Financial stability, demographic shifts, a leadership/talent crisis and technology impact higher ed insurance. Not to mention student health insurance — which have had rate increases of around 5% over the past three years.
Student wellbeing remains a top priority as universities grapple with managing health plan costs. Many schools struggle to place adequate coverage within their liability programs for both abuse and traumatic brain injury.
Captives, consortiums and other alternative risk financing options continue to grow in popularity as universities seek more control over their risk financing.
In general health care, M&As continue to remain at a record high, with 31 announced hospital mergers in the first half of 2024. The sector is also facing high levels of staffing burnout and shortages, leading to facilities enhancing their benefits to aid and maintain their workforce.
“The real estate space (including office, industrial, retail, habitational, hospitality, etc.) continues to be affected by a wide range of variables that can impact availability of capacity, breadth of coverage, competitiveness of rate, and more,” reads the report.
An increased demand for last-mile deliveries coupled with a labor shortage has the transportation industry facing both growth and challenge. According to the report, it remains a hard market.
Specific risk factors continue to fuel recent premium increases with physical damage hitting +20% to 25% and umbrella liability +10% to 30%, as well as auto liability 10% to 20%.
Highlights by Insurance Lines
In addition to industry, Risk Strategies reviewed insights by insurance lines.
The captive insurance market, it found, continued to thrive in 2024, thanks to ongoing economic pressures and flexible risk management solutions: “Captives are seen as a versatile tool for risk retention and transfer, with applications expanding beyond traditional areas into property coverage, excess liability, and innovative revenue-generating programs,” per the report.
Uncertain liability loss trends continue to increase premium and rates for most casualty lines, however competition for new business could tip the scale for some industries.
Cyber remains a rapidly evolving landscape. Carriers seem to be maintaining their strict underwriting scrutiny for cyber, as ransomware attacks resurged in the latter half of 2024.
Organizations are generally seeing a decrease in cyber premiums, at the rate of 5% to 10%. However, those organizations with layered cyber security controls are experiencing premiums decreases of up to 20%, sometimes more.
AI also remains on insurers’ radar as a double-edged sword risk: On the one hand, AI tools can help cyber risk management be better at detecting mishap; but on the other, cybercriminals are leveraging AI to inflict harm.
In the employee benefits world, constant change is the norm, and as 2024 ends and 2025 begins, Risk Strategies report predicts a few factors that’ll bring shifts: a bigger focus on equity and employee experience, pharmacy innovation will influence cost trends, increased transparency scrutiny highlighting employers’ fiduciary responsibility, and more.
“In our initial outlook for 2024, we saw changing workforce and hiring dynamics increased impacts from turnover and the fast pace of pharmacy innovation trends. We anticipated increased medical utilization, inflationary pressure, and changes in admitting and billing patterns to play a significant role in raising costs for employers,” shared John Greenbaum, National Employee Benefits Practice Leader, Risk Strategies.
Perhaps one of the biggest reliefs of 2024: The property insurance market stabilized significantly this past year, driven primarily by two years of insurer and reinsurer profitability and improved conditions in the reinsurance market.
Catastrophic weather, particularly wildfire, remain major issues for the space, causing a larger reliance on excess and surplus lines market. Parametric solutions have acted as another alternative to traditional property insurance, providing “rapid financial relief based on predefined triggers,” according to the report.
For private client services, the primary drivers causing market challenges are severe weather activity, a complex regulatory environment, and fluctuations in reinsurance rates and terms. Throughout 2024, we have seen the effects of this hard market with increased property, auto, and excess liability rates. However, for private clients Risk Strategies remains optimistic for the future.
“The reinsurance market is stabilizing as insurers have made fundamental changes to their portfolios, including rate, coverage changes, and overall risk selection, particularly in catastrophe-prone areas,” shared Alison Murphy, National Private Client Services Practice Leader, Risk Strategies. “We are finding better, creative solutions for challenging properties, including coastal and wild-fire exposed risks, in the non-admitted market. Additionally, the hard market environment provides us the opportunity to have more frequent dialogue with our clients to help them rethink their approach to protection.”
Working with Specialists That Get It
Building business resilience starts with an understanding of the risks impacting organizations and strengthens with top-tier risk management strategies.
The Risk Strategies State of the Insurance Market report aims to give risk professionals that first step into protecting their business and creating resilience as they navigate the challenges and opportunities they face in the market.
“Risks are not going away and continue to evolve and become more complex,” Scroope said. “We’ve compiled these industry insights from insurance experts in our specialty practices and product lines who work with clients every day to stay ahead of risk.”
Every business wants a partner that understands their unique needs. Risk Strategies aims to be that broker — one with deep experience in the core insurance product lines, and with highly trained expertise that supports clients in that segment, and has the right relationships in the marketplace to do so.
“Understanding the trends and conditions in your business sector is key to developing a risk management strategy that ensures long-term resilience, profitability, and success,” added Scroope. “We want to protect what matters most to you while building security and stability for 2025 and beyond.”
To learn more, visit: https://www.risk-strategies.com/state-of-the-insurance-market-report-2025-initial-outlook-2024-wrap-up
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Risk Strategies. The editorial staff of Risk & Insurance had no role in its preparation.