The market is evolving at a rapid pace and a variety of factors are influencing trading dynamics. An easing of some pressures, such as the reduction of interest rates and inflation, is providing beneficial tailwinds to the market. Others, such as loss activity, are providing headwinds that may impact different areas of the market. Particularly prominent is the catastrophic impact of natural disaster events that have hit Canada and the globe this year.
Canadian insurers reported a stronger return on equity than the three-year average following portfolio remediation activity in prior years. With interest rates steadily declining, insurer investment results will decelerate, requiring insurers to become more aggressive on growth while maintaining a balanced approach so as not to impact profitability.
With natural catastrophe losses expected to be over $7.6 billion in 2024, we have already exceeded the previous record of roughly $5 billion in insured NatCat losses set in 2016. These loss events have disproportionately impacted the personal lines marketplace, but of course results vary by insurer. It will be important to watch results for the rest of the year, since the rise in frequency and impact of NatCat events could cause insurers to become more cautious. If that happens, it will manifest through strict underwriting discipline or capacity restrictions.
We continue to encourage clients to develop renewal strategies well in advance, which will allow brokers to gather proper information and leverage analytics to understand their risk profiles and loss experiences, and thus better evaluate their risk tolerances. As part of this planning, we are deploying embedded tools to provide insights on exposure impacts, loss expectations, and better evaluation of insurance program options. Going forward, these tools will be part of the broking process and currently cover property and casualty lines, with directors and officers and cyber liability under development for Canadian exposure.
These and other tools have emerged from our collaborative approach internally within risk capital and we continue to look for additional opportunities to connect and support enhanced decision-making throughout 2025.
