We are in a transitionary market, but with an underlying sense of fragility. Global and regional market factors are driving a more stable and friendly market for buyers, even as that fragility rears its head on a regular basis.
More specifically, Canada is coming out of its largest catastrophe year ever, with over $7.6 billion in Cat-related property losses in 2024. A significant number of those losses are in the personal, not the commercial, market. But some carriers have exposures to both, so it affects the overall market dynamics. The losses will have some bearing on the 2025 market.
Broadly speaking, it feels like these events are becoming seasonal occurrences. Floods, hail and wildfires are Cat events you would normally plan for as one-in-five-year or one-in-10-year events. The question remains: What impact will that have on the market?
Globally, the world is becoming riskier. Instability exists in the geopolitical environment and therefore the insurance market. Also, the reinsurance market has remained stubbornly hard. Prior to the most recent hurricanes in the U.S., there were signs the reinsurance market had peaked and was starting to transition into a softer market. However, Cat events in Florida quickly changed the perspective.
As for fragility in the North American casualty space, we see market practitioners continue to increase reserves on past years in response to evolving exposures. Conversations have focused on the question: Is pricing keeping up with loss trends? Continual adjustments in reserving on legacy years are an indicator. The unanswered question is how the market responds to these dynamics.
Over the past year, professional liability — notably D&O and cyber — have seen rates decline. Supply became extremely short in the hard market and pricing went up significantly. Now, capacity has come back in an exaggerated fashion. The market impact of these changes is significant and clear. Logic would indicate this downward pressure cannot be sustained.
