The commercial property insurance industry generated US$254.9 billion in 2022 and is projected to reach US$724 billion by 2032, with a compound annual growth rate (CAGR) of 11.3% from 2023 to 2032, according to a new report from Allied Market Research.
The growth of the commercial property insurance market is driven by factors such as increasing awareness of risk management among businesses, regulatory requirements mandating insurance coverage, and the rise in natural disasters and man-made incidents. Additionally, the expansion of businesses globally contributes to the demand for property insurance.
However, the market faces challenges such as insurance fraud, volatility in property values, and the complexities of underwriting large-scale properties, the report said. Despite these challenges, opportunities exist in the adoption of advanced technologies like artificial intelligence and data analytics for risk assessment, the development of customised insurance products, and the potential for market expansion in emerging economies with relatively low insurance penetration.
The COVID-19 pandemic has had a significant impact on the commercial property insurance market. Lockdowns and reduced activity resulted in a surge in claims for business interruption coverage, leading to disputes over coverage eligibility due to the requirement for physical property damage. Remote work, supply chain disruptions, and uncertain economic conditions prompted insurers to adjust premiums, coverage options, and underwriting practices, creating a more complex and challenging insurance environment.
The open perils segment held the highest market share in 2022, accounting for approximately three-fifths of the global commercial property insurance market revenue, according to the report. This segment is projected to maintain its leadership status throughout the forecast period.
Offering multiple coverage alternatives can become a growth element as risks and requirements vary among firms. Additionally, the types of risks addressed by commercial properties may change as businesses expand and new sectors emerge, positively impacting market growth. The open perils segment is also expected to exhibit the fastest CAGR of 12.3% from 2023 to 2032. Organisations searching for comprehensive insurance solutions that protect against a wide range of dangers may be attracted to open perils coverage, contributing to market growth.
The agents and brokers segment held the highest market share in 2022, accounting for over one-third of the global commercial property insurance market revenue. Agents and brokers evaluate specific risks faced by businesses, such as property location, construction type, and industry, among others. They customise commercial property insurance solutions that provide comprehensive coverage tailored to the specific risks encountered by each business.
However, the direct response segment is expected to exhibit the highest CAGR of 13.7% from 2022 to 2032. Commercial property insurance firms collect feedback from businesses that have interacted with their direct response platforms, which provides vital information on the user experience, accessibility of the platform, clarity of provided information, and areas for improvement.
The large enterprises segment held the highest market share in 2022, accounting for approximately three-fifths of the global commercial property insurance market revenue. This is because large enterprises often engage dedicated risk management teams or consultants to identify and minimise risks, the report stated. They collaborate with insurance companies to establish customised coverage options tailored to their individual risk profiles.
However, the small and medium-sized enterprises segment is projected to exhibit the highest CAGR of 12.9% from 2023 to 2032. Workshops, seminars, and instructional campaigns can help SMEs understand the risks they face and the available coverage options, creating opportunities for corporate lending in the healthcare industry.
The manufacturing segment held the highest market share in 2022, accounting for nearly one-fifth of the global commercial property insurance market revenue. This is due to the growing demand for equipment and technology finance in the healthcare industry to protect physical assets such as factories, warehouses, and machinery. Stricter regulations regarding safety standards and environmental protection drive manufacturers to invest in comprehensive insurance coverage to mitigate compliance risks.
However, the healthcare segment is expected to exhibit the highest CAGR of 16.4% from 2023 to 2032. The escalating value of medical equipment and technology necessitates protection against damage, theft, and breakdowns.
North America held the highest market share in 2022. However, Asia-Pacific is projected to post the greatest CAGR among the regions with 15% between 2023 and 2032, the report said.
Asia-Pacific is likely to dominate the market throughout the forecast period, with companies in the region focusing more heavily on risk management and loss mitigation, the report said.
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