Brokers: Rates falling fast in 'incredibly competitive' US property insurance market

By Mia MacGregor

May 23 - (The Insurer) - The U.S. commercial property insurance market is evolving into a buyer's market, as multiple broker sources point to rate reductions, an oversupply of capacity and intensified competition among carriers, many of whom are expanding their risk appetites.

Brokers talking to The Insurer at RIMS' Riskworld conference in Chicago earlier this month described a softening U.S. property market with insurers looking for growth while also remaining cautious about potential losses in the rest of this year.

Marsh’s U.S. property practice leader Mike Rouse characterized the current market conditions as "incredibly competitive" regarding property rates. He attributed this to a growth mindset among carriers following years of coverage contraction.

"The market's gotten to a point where it can sustain some of the volatility that's been occurring in the marketplace between frequency and some severity events," Rouse explained.

“Profitability for carriers has allowed them to develop a growth mindset in property, and that growth mindset created an oversupply market, which has had a very positive impact on rates.”

Despite political uncertainties and rising exposure costs, Rouse noted that clients are rate reductions are providing some relief from business pressures. Many are purchasing additional insurance or higher coverage limits amid an awareness of the increased risks in today's world.

“Clients are thinking about how much riskier the world is, and they're being more thoughtful with their spend. They're either buying higher limits or using savings towards other business needs,” he added.

Marsh’s insurance index released near the end of April showed that U.S. property insurance rates declined 9% in the first quarter of this year, compared with a drop of 4% in Q4 2024, driven by increased insurer competition and decreasing reinsurance costs.

The broker highlighted that insurers typically offered coverage enhancements to clients, including higher limits, revised definitions, and lower deductibles, seeking to avoid concessions on rates.

It added that underwriting scrutiny of submission data typically decreased, though the broader economic environment may renew insurer focus on valuations.

Blake Giannisis, North American property practice leader at Hub, noted drastic rate reductions, particularly on shared and layered accounts, that are being driven by supply and demand dynamics.

"Rather than leveling off, it's dropping, and it varies between the types of accounts. Shared and layered accounts are the ones that are really seeing these big reductions in rates,” he said.

Giannisis noted average reductions of 10% to 15%, with some accounts experiencing decreases of up to 40%.

“So the general sentiment from a lot of people is ‘okay, right now we can give these reductions, but we're very cautious and aware of what the market might do if we get hit with more losses throughout the remainder of the year’,” he explained.

He emphasized that "markets are expanding their appetite, quoting accounts they previously might not have".

Giannisis also highlighted the role of reinsurance as a leading indicator for the property insurance market.

"Reinsurance saw a big run-up in rates and a tightening on capacity over the last couple of years. Now, the reinsurance markets are providing favorable renewal results to our direct retail markets, passing those benefits back."

However, he cautioned that losses remain a factor.

“We're just getting into peak hail and tornado season. One big loss probably wouldn't be enough to turn the market, but it would level it off. A second significant event could shift the market back in the opposite direction."

SCS A BIG FOCUS FOR UNDERWRITERS

Martha Bane, managing director of Gallagher’s property practice, pointed to severe convective storms as a key focus for underwriters in 2025, with losses from the perils pushing up deductibles on clients’ programs.

"Severe convective storms have made up most of the loss activity for the last seven years, and so I think it's a focus for the underwriting community," Bane explained.

She noted that underwriters have previously addressed this risk with higher deductibles and a shift back in 2023 from flat all other perils deductibles to percentage deductibles.

But with the improving market, clients have been able to secure deductible buy downs to help manage the additional risk they have had to assume, Bane said.

“It's still a challenge for some of our Midwest clients, but the coverage is available. It's just become more of a focus on that coverage,” she added.

Bane noted that wildfire falls in a similar category.

“With a $50 billion loss from the beginning of the year, if you're in a severe wildfire exposed area that can be challenging. However, we found that the capacity is still there and pricing premiums are declining.”

Aon's global head of property Ryan Barber said there has been a dramatic increase in the take up of alternative insurance solutions, with the broker placing 10 times the number of parametric deals in 2024 than in 2023.

“We see a lot more increased competition to traditional insurance coming from captive utilization, and the alternative risk transfer market in the form of structured risk and parametrics,” Barber said.

He observed that despite the market softening, interest in these alternatives continues to grow.

"Clients want to educate themselves on these alternatives, starting to utilize and blend them with traditional insurance to mitigate volatility and build resilience into their programs," Barber stated.

He advised clients to capitalize on the current favorable conditions.

"The long-term trend of global property losses continues to rise due to climate change and demographic shifts. If you look at the top 20 fastest-growing cities, half of them are in Texas, which means more development and greater exposure to risks."

Barber emphasized the importance of future-proofing insurance programs.

"Our advice to clients right now is to take advantage of this window of opportunity to really strengthen their programs against inevitable market changes when they happen again," he said.