Property sector on track for stable growth: III

Despite climate risks and inflation, U.S. commercial property insurance rates should turn the corner for buyers and the sector remains on track for stable growth, according to a report Friday from the Insurance Information Institute.

Double-digit rate increases, common in recent years for properties in high-risk regions or with poor loss histories, may continue for high-risk exposures, the report said.

While higher premiums have been a key driver of commercial property insurance market growth, rates fell by 0.94 percent in the second quarter, marking the first quarterly rate decline since 2017, according to Aon PLC data cited in the report.

Strong underwriting performance and improved investment returns, which can bolster operating profitability, could play a critical role in the medium to longer-term, the III said.

In 2023, commercial lines outperformed the long-term average, even as direct premium growth slowed, according to the 2024 S&P Global Market Intelligence report cited in the III report.

The commercial property segment had a net combined operating ratio of 91% in 2023, down from 102% in 2020, and the segment comprised $254 billion (or 26%) of global commercial lines premiums across 25 primary insurers, according to a McKinsey report cited by III.