2024 Full year global insurance carrier earnings overview
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Welcome to Howden Re’s 2024 full year global insurance carrier earnings overview. Here David Flandro, Head of Industry Analysis and Strategic Advisory, Howden Re and Michelle To, Head of Business Intelligence, Howden Re have a broken down the data and industry trends ahead of 1.4 renewals.
Howden Re’s key themes of earnings in 2024:
- Reserving volatility
- Widening loss-gaps
- Importance of disciplined underwriting as pricing stabilizes
- Capital recovery driven by earnings and investment gains as strong ILS issuance
At 1.1.25, renewal volumes increased but were still lower than previous 1.1.24 renewals with the nature changing as well.
“It is now clear that pricing is no longer that tail wind that it was, carriers are achieving growth through increased exposure, although exposure remains low compared to long term averages,” To said.
This trend varies significantly by line of business, for example, it is evident that premium growth now outstrips pricing in liability lines.
During the year, insurer and reinsurer calls were filled with observations around higher catastrophe loss expectations around severe connective storms, wildfires, and so-called secondary perils which increasingly look like primary perils. These secondary perils have been driving the catastrophe loss experience over the past 5 years. In fact, they’ve contributed over100bn in losses for the past five years in a row.
“The 2024 underwriting performance outstrips the average of 2019-2023,” said Flandro. “In general, for everybody, combined ratios improved by about 3.6 percentage points.”
The data shows that tactical, intelligent reinsurance buying remains key to performance and this is true across a range of carriers.
Looking ahead through 2025, Flandro warns that the California wildfire losses will exacerbate secondary peril losses.
“The loss-gap has been a massive topic of conversation over the last six months, especially with the LA wildfires,” said Flandro. “This could end up being a 60-90bn loss gap for the LA wildfires alone. It’s an increasing trend worldwide where policyholders and cedents have difficulty obtaining coverage.”
However, the big elephant in the room is reserve development, particularly liability reserves. Flandro, To, and the team have broken down “good vs ugly” in the report, highlighting reserve development. Liability reserves are developing deficiently while workers comp, short-tail, specialty and more balance it out. The question now is how long it will continue.
In total, To explains that the impact on carrier book values is positive.
“Underwriting results and investment returns are significant in 2024, leading to capital growth even after strong dividend growth and share buy-backs,” said To. “This newly robust position is helping to facilitate greater capacity levels on programs. “
Since 2022, Flandro and To said they’ve seen the greatest value of economic creation since 2007, leading to a great time to be underwriting. While the trend is beginning to shift a little, it’s still very positive for almost all classes of business in long-term historical terms.
“Top-line growth must come through exposure, not just price,” said Flandro. “It requires innovation, it’s an underwriters' market but there’s still plenty of economic value to be created.”