As we enter 2024, it is time to break out the crystal ball and offer up predictions for the insurance market for the new year.
First, the good news (at least from a risk management and broader economic perspective). The marine insurance market is expected to continue to grow in 2024. The cargo market is predicted to show some modest growth and when coupled with continued increases in property and vessel values and increased demand for marine insurance products from emerging markets, the increased premiums generated should help shore up insurers’ balance sheets.
Make no mistake, however. We are not out of the woods yet. Market concerns among insurers shows no signs of abating. Among the concerns are the increasing value of global trade, the growing complexity of global supply chains, the rising frequency and severity of natural catastrophes, potential broader economic instability, and the ongoing conflicts in Ukraine and the Middle East. Then there’s what will likely be turbulent election campaigns in the U.S, UK, Mexico, Taiwan, and India among other countries, could lead to uncertainty and instability that bleeds over into the insurance markets.
Additionally, the hard market that hit with full force last year will likely continue well into 2024 if not into 2025. A hard insurance market is characterized by higher premiums, stricter underwriting standards, and reduced availability of coverage. It is caused by a combination of historical underpricing of risk, increased frequency or severity of losses, underperforming investments, increased reinsurance expense and broader economic pressures.
Thus, the marine insurance market is expected to be characterized by several trends in 2024 that echo those we saw in 2023. This includes a continued hardening of rates, an increasing focus on underwriting profitability, an increased demand for new and innovative marine insurance products, and the increasing use of technology to improve (or at least rationalize) underwriting and claims handling.
In my market predictions for 2023 that was published in the February 2023 issue, I noted that companies that focus on the fundamentals of risk management, claims management and safety culture would be best positioned to ride out the tightened underwriting and higher rates of a hard insurance market.
This is still true, but it is important to be aware that as we head into the second year of this hard market good risks can get caught up with the bad as insurers push to either return to or increase profitability. Good companies can still usually hold their insurance costs down but this wave ultimately breaks over all of us.