Overall, buying conditions will remain favourable into 2025, with a continuation of underwriting trends we experienced in 2024. Barring a series of catastrophic losses, the Canadian market will continue benefitting from improved rates on many lines of insurance, while maintaining coverage innovations achieved over the past year, and supporting a competitive market. However, we expect the impact of climate-related events to influence underwriting certain risks and asset classes negatively — namely, property in areas exposed to wildfires. This phenomenon will likewise impact personal lines, as flood maps are being reassessed and markets are re-calibrating appetite, capacity, restrictions and pricing accordingly.
As the geopolitical environment becomes more complex, cybersecurity concerns are top of mind, and impacts of climate change are discussed at the board level, risk managers are expected to deliver resilience strategies, relying more than ever on models and analytics. The past is no predictor of the future, and risk management strategies now take that into consideration.
Markets will continue to scrutinize ESG factors, and strong ESG postures are expected to positively impact risk pricing on certain lines of coverage, namely directors and officers.
Climate exposures will continue to present major challenges affecting both buyer and insurer results. While inflation rates are declining, the impact over recent years will continue to drive claim costs across all lines of insurance. Declining rates are expected to impact the cost of capital, perhaps letting some businesses increase their retention levels in less critical lines of risks.
Buyers will continue seeing generally increased market capacity and some rate relief, which should offset price increases driven by macroeconomic factors such as labor shortages, ongoing supply chain challenges and inflation.
Further, we see an increased need in the market for more accurate scenario-based planning, supply chain stress testing, and more refined definition and quantification of exposures, given a more complex risk environment. There is increased interest in using analytics, which risk managers use to evaluate proper retention levels and assist underwriters in allocating catastrophe coverage capacity.
We expect a more acute need to rely on data and risk advisory services to better quantify the business value of the insurance purchase, especially as firms seek to generate savings in a market where cost management is scrutinized and mergers and acquisitions remain active. In this context, an insurance advisor’s ability to engage holistically on industry-specific risk and evolution is a key component of risk managers’ expectations.
