Global insurance and reinsurance broking group Aon has released its latest capital poll, which showcases that most US insurers expect to exceed a growth rate of 5% in 2025.
According to the firm, many survey respondents foresee a favorable environment conducive to direct premium growth, with roughly 44% expecting to grow by a range of 6-10%, while 26% are expecting to witness strong growth of 11% or higher in 2025.
At the same time, around 23% of respondents are expecting to obtain 2025 premium growth of 1-5%, while only 7% of respondents forecast their growth to be flat to down.
Specialty insurers do not anticipate growth to decrease, likely due to positive momentum toward the E&S market, Aon noted.
In addition, half (50%) of commercial insurers reportedly expect to grow around 6-10% in 2025, while around 36% expect slower growth at 1-5%.
Aon also stated that around 41% of personal lines insurers anticipate to see 6-10% growth, while 25% are expecting to see rapid growth of more than 15%
“Favorable growth outlooks in both lines are mainly attributed to anticipated rate increases. Initially, the commercial property market was predicted to soften, however, storm activity in the second half of 2024 may slow this trend. Personal lines rates continue to rise in reaction to retained catastrophe frequency losses driven by secondary perils and persistent inflation. Social inflation also continues to pressure reserves, encouraging continued pricing momentum,” Aon said.
In terms of insurers’ capital levels and their impact on growth, there appeared to be more mixed views, Aon added.
Most respondents had sufficient or excess capital; however, around 22% revealed that they may need to slow growth in order to manage capital.
On the other hand, commercial insurers appeared less likely to have capital constraints, with roughly 36% reporting excess capital to fund new opportunities and about 41% indicating sufficient capital to fund existing initiatives.
An important factor that Aon highlights, is that nearly 80% of respondents said they were not receiving any pressure from rating agencies or regulators to bolster their capital position.
“The unrealized losses that many insurers experienced in 2022 have now largely reversed. This, along with the series of underwriting actions — such as rate increases and various exposure management initiatives — resulted in strong earnings for much of the industry, alleviating pressure felt in the market during 2023,” Aon added.
The 20% of respondents who said that they experienced pressure from external stakeholders were mostly personal lines companies.
Whilst personal lines have started to recover from many of the challenges seen in 2022 and 2023, they continue to face a number of headwinds, including the regulatory environments that challenges their rate adequacy, Aon continued.
The broker also explained that many of these respondents also indicated that their retentions were high relative to next year’s earnings.
Furthermore, respondents were also asked about the forms of capital they are including in their 2025 capital management plans. According to Aon, the largest percentage of respondents (36%) answered that management was relying on retained earnings, equity and/or traditional reinsurance.
However, compared to responses from the broker’s Fall 2023 Capital Poll, respondents increased their interest in structured reinsurance, which received the second largest percentage (22%).
As for insurers that remain capital constrained, yet seeking growth, Aon suggests that structured quota shares might be a possible solution.
“As social inflation continues to impact the results of insurers with significant liability exposure, they may turn to a Loss Portfolio Transfer (LPT) /Adverse Development Cover (ADC) to ease earnings volatility,” the broker added.
“Most insurers are anticipating robust growth in 2025. While some insurers continue to work through capital constraints, many are approaching 2025 with relative capital strength. Many respondents indicated an excess in capital, potentially welcoming a new wave of organic and inorganic growth,” Aon concluded.
In Fall 2024, Aon surveyed over 70 upper management respondents across various US insurers. Respondents represented commercial, personal, specialty, and reinsurance carriers and were representative of surplus sizes ranging from less than $50 million to greater than $2 billion.
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