An analysis of the most pressing concerns based on insights from 1,000 UK business leaders.
Author: Stephen Smith
Following the challenging market conditions of the past few years, there has been some relief for property and casualty insurance buyers during 2024. Property is in transition to a more competitive market and pricing within casualty and financial lines is also continuing to reduce. Motor, which has its own unique characteristics, will remain challenging for most buyers. The expectation is that these trends should continue into 2025.
As we approach the 1 January reinsurance renewals (at the time of writing), there is a sense that despite major catastrophe events around the world in 2024 (including claims relating to Hurricanes Helene and Milton) the industry is sufficiently capitalised to absorb the losses, without the need for significant pricing or retention changes affecting primary insurers costs.
Rating agencies anticipate the US hurricanes will be an earnings event, not a capital event, for reinsurers.
An opportunity to gain more balance sheet protection
During 2024, we saw more capacity entering the market, offering clients more choice at renewal and presenting an opportunity to transfer more risk off their balance sheets.
Based on a company’s risk appetite, we would expect to see more strategic buying decisions over the coming months. Now is a good time to reassess sums insured, limits, deductibles and business interruption protection, to ensure insurance coverage is fit for purpose and firms are adequately protected.
The watchwords for 2025 are discipline and sustainability, with long-term relationships and consistency of coverage remaining important. This is important given the increasing frequency and severity of natural catastrophes, with several notable flood events across the UK during 2024.
As the market softens, businesses should consider whether it is now better value to transfer that exposure and risk off their balance sheet to an insurer.
Even though the rate of inflation is less than it was, the base cost is still higher. Therefore, if you take the opportunity to ensure that sums insured are accurate, you might not pay any more than you did a year ago, but you’ll be insured for the true value and properly protected.
Advanced technology drives higher cost of repairs in motor
Claims inflation in motor insurance continues to present a challenge for insurers, and by default, losses will continue to be reflected in insurance pricing.
More advanced technology in vehicles and the rising number of electric and hybrid vehicles on the roads are driving up repair and replacement costs. In 2023, insurers paid out £9.9 billion in motor insurance claims and over the last decade, claims costs have risen at almost three times the rate of premium increases1.
While there is less volatility within global supply chains than there was, disruptions continue to occur, making parts and labour harder and more expensive to source.
Geopolitics, reputation management and AI tools
Looking ahead to 2025, geopolitical risk is becoming an increasingly prominent factor in insurance strategies. Ongoing interstate conflicts, along with rising civil unrest globally, are reshaping how businesses view their security and insurance needs.
Reputational risk, too, is playing a larger role in businesses' risk management strategies. The rise in environmental activism and climate-driven litigation has led to boycotts and protests targeting major corporations in 2024, with such scrutiny expected to increase.
Meanwhile, high-profile cyber-attacks continue to make headlines, often with share price impacts and exposures for company directors and officers.
The demand for cyber insurance is projected to grow from $20.88 billion in 2024 to $120.47 billion by 20322 as firms see the benefit of indemnification and access to risk expertise and incident response.
Technological innovations are also shaping the insurance market, particularly in risk assessment and claims management. Advanced data analytics, AI and climate modelling are helping insurers better understand and price property and casualty risk.
Such innovations enable more precise underwriting and allow insurers to respond more quickly to emerging threats, such as extreme weather events or cyber-attacks.
Looking ahead
For businesses navigating the complex insurance landscape, the key to success lies in adopting a strategic approach to risk management and insurance buying. This includes conducting regular insurance reviews and making sure risk retention strategies align with the evolving risk environment.
At Gallagher, we are committed to ensuring that clients are equipped with the optimal coverage to manage risk effectively, whether through traditional insurance products or alternative risk transfer strategies.
The consistency of the insurance provider remains important in a transitioning market. Chasing the best price is not necessarily going to yield the best outcome in the event of a significant claim or loss.
