2024 a strong year for insurance carrier earnings despite pricing shifts and rising peril losses: Howden Re

In 2024, global insurance carriers experienced a year of improved underwriting performance and capital recovery, which contrasted with growing concerns around reserving volatility and widening loss gaps, according to a recent analysis by Howden Re.

One of the report’s central themes is the stabilisation of pricing following a period of significant increases.

While renewal volumes at the key January 1st, 2025, renewals saw an uptick, they remained below the levels of the previous year, indicating a change in market dynamics.

“It is now clear that pricing is no longer that tail wind that it was, carriers are achieving growth through increased exposure, although exposure remains low compared to long term averages,” said Michelle To, Head of Business Intelligence, Howden Re.

This trend, however, varies significantly across different lines of business, with premium growth now outpacing pricing in liability lines, for example. The report also highlighted the importance of disciplined underwriting as prices stabilise.

A significant concern highlighted in the report is the increasing impact of secondary perils, such as severe convective storms and wildfires, which are increasingly behaving like primary perils.

Over the past five years, secondary perils have contributed over $100 billion in losses annually.

“The 2024 underwriting performance outstrips the average of 2019-2023. In general, for everybody, combined ratios improved by about 3.6 percentage points.” said David Flandro, Head of Industry Analysis and Strategic Advisory, Howden Re.

Data has shown the importance of tactical and intelligent reinsurance buying across various carriers, the report also noted.

Flandro predicts that secondary peril losses will be worsened by California wildfire losses as we move through 2025. He stated: “The loss-gap has been a massive topic of conversation over the last six months, especially with the LA wildfires.

“This could end up being a 60-90bn loss gap for the LA wildfires alone. It’s an increasing trend worldwide where policyholders and cedents have difficulty obtaining coverage.”

The report has also flagged reserve development, particularly liability reserves, as a significant area of concern. Flandro, To, and the team have broken down “good vs ugly” in the report, highlighting reserve development.

At the same time, the positive development of workers’ compensation, short-tail, specialty, and other lines is balancing out the deficient development of liability reserves, the report also noted, but questioned the sustainability of this trend.

In total, To explains that the impact on carrier book values is positive. “Underwriting results and investment returns are significant in 2024, leading to capital growth even after strong dividend growth and share buy-backs. This newly robust position is helping to facilitate greater capacity levels on programs.”

Capital recovery, driven by earnings and investment gains as strong ILS issuance, was also highlighted as a key theme in 2024 by the report.

Flandro and To observed that the period since 2022 has experienced the most significant economic growth since 2007, creating an ideal environment for underwriting.

Although this trend is starting to change slightly, it remains very positive for most business classes in the long run, according to the report.

“Top-line growth must come through exposure, not just price,” said Flandro. “It requires innovation, it’s an underwriters’ market but there’s still plenty of economic value to be created.”

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