Despite climate change, nuclear verdicts, and widespread inflationary effects, expect a mixed bag of market conditions in 2025, which is deemed to be a “positive sign of recovery from the hard market,” experts predicted during a recent webinar by insurtech Send.
In particular, auto, specialty, and excess and surplus lines will soften across North America, while property will remain hard in 2025, predicted Jennifer Kyung, CEO and founder of NextGen Underwriting.
“We are not in a place of stability” she said. “I would expect [property] would continue to be hard as insurers are really trying to figure that out and navigate that. We’re in a bit of a different place for auto, where [U.S.] insurers and personal lines have really been able to navigate that and regain profitability, regain stability, in the auto area.”
Panellists in Send’s webinar series, Infuse, looked at trends across the North American marketplace.
However, Canada’s auto sector is not in the same place as in the United States, with hard market conditions reported in both personal auto and property lines, as auto theft claims continue to be an issue. (Although Canada saw a slight dip of auto theft claims by 19% in the first half of 2024 compared to last year, claims have increased by 138% over the past 10 years, according to Insurance Bureau of Canada.)
In addition, proposed product reforms in two of Canada’s largest private auto insurance markets — such as Ontario’s upcoming accident benefits optionality and Alberta’s extended rate cap — could distort market results further, as auto insurers try to boost profitability.
Martina Conlon, executive principal at Datos Insights, says insurers have their eyes on specialty, and excess and surplus (E&S) lines.
“We do see an awful lot of insurers right now trying to expand into softer jurisdictions or softer lines of business, like specialty, like E&S, where there appears to be a little bit more opportunity.”
However, one thing is common to all North America: a hardened property market.
Thus far, Canadian insurers have paid more than $8.3 billion worth of claims caused by natural disasters. That’s the highest figure for NatCat-related damages in the country’s history.
“Our underwriting modelling, which was created and done over 100 years ago, has not caught up with all the changing weather patterns,” said Tandis Nili, managing principal of global risk management at EPIC Insurance Brokers & Consultants. “So the crystal ball that [the models] present to us is murkier than usual. One hundred-year events are now occurring in a 10-year timeline and cadence, and so it creates a lot of unpredictability.”
On the liability side of the business, nuclear verdicts are increasing in frequency and severity in the U.S., and are contributing to market volatility. Webinar panellists observed that U.S.-based litigation trends often make their way into Canada.
“To a lot of jurors, [nuclear verdict lawsuits] seems to be Monopoly money,” said Nili. “So that’s impacting the reaction of the underwriting community to covering this risk and, frankly, [leading to] greater efforts to push a lot of this risk to the insureds and the policyholders, as opposed to assuming the risk by cutting capacity, by cutting coverages. So, that creates a lot more volatility in the marketplace.”
Inflation, which impacts everything from property values to the cost of labour, auto or home repair parts, also creates a volatile market, said Nili.
Feature image by iStock.com/Delpixart
