What will the New Year bring for the insurance market? It’s the question on the mind of many across the sector as they consider whether 2025 will offer a blank canvas or a continuation of the pressing topics and themes from 2024.
Sharing his perspective, Dan Trueman (pictured), chief underwriting officer at CFC, noted that changing market conditions were a major point of discussion last year - and one he expects will continue to dominate many conversations in 2025. “We’ve experienced a good market for the last few years but the trading environment has changed over the course of 2024 across a number of different lines.
“We’re seeing the market is softening – and softening reasonably fast in certain areas. I suspect that there’s still a long way to go in 2025 before that softening has run its course for some other areas too. What’s really interesting, however, is that it’s clear there is no longer a ‘one market’ condition. We’ve actually seen more micro cycles, with different parts of the market going at different speeds in terms of price changes and conditions.”
For example, Trueman noted that in the large corporate cyber space, the relative price changes are significantly different to SME cyber in terms of the pace of change. The likelihood of how quickly one of those will settle and find a new normal is very different.
“I think we’ll see that process across the board as we find SME classes tend to be slightly more insulated from the more volatile aspects of the price curve than some of the larger businesses,” he said. “I do expect this will also continue to be a theme throughout 2025 because, evidently, not all markets face the same problems at the same time.”
Touching on what’s facing the industry in the early days of 2025, Trueman highlighted that the industry is currently experiencing a number of challenges. An obvious one is the pricing cycle and the knock-on effect that will have. Also, he said, with re-pricing likely to happen across casualty business if adverse prior year development patterns continue – particularly in North American exposed business, but by no means exclusively so – it will be interesting to see if this impacts demand in some other classes of business.
If organisations are faced with having to pay significantly more for their casualty exposure, he questioned whether that alters demand for some of the other esoteric and emerging risk products.
At the same time, he said, in a softening market, broker partners are looking for emerging risks and new products – a convincing new opportunity that they can take to their clients to help generate revenue for the brokerage by closing a genuine protection gap for their client. “So a key challenge for the industry will be to understand what the key products are going to be and understand how successful they will be.”
As to where he sees opportunities for the industry, Trueman underscored CFC’s belief that there are protection gaps emerging for organisations as the world changes, and the move from more tangible to intangible risks is a core element of that.
“Cyber remains a major opportunity for the market,” he said. “Whilst the cyber pricing cycle hasn’t been as hard as it was and certainly we’ve seen a softening in rates, we’re seeing some flattening out in our pricing and do believe that should make it a more attractive opportunity for buyers.
“And, quite frankly, as penetration rates are still very low, there are a lot of potential new buyers out there, particularly in the less mature geographies. While penetration rates may be slightly higher in the US, outside of that market we see significant potential for growth. In fact, our hypothesis for cyber is that the market needs to focus on understanding and serving the buying needs of these current non-buyers to prevent cyber from going from the greatest opportunity in the industry to the greatest missed opportunity.”
CFC is also seeing increased demand for products like intellectual property cover, he said, and, as the world moves on and increasingly digitises and evaluates the way it delivers healthcare, the firm is seeing huge opportunities in the digital health insurance and life sciences spaces.
Looking to the US, he noted that if its economy benefits from interest rate cuts and a more business friendly regime, CFC might see growth in certain sectors there. This could include demand for products in the tech E&O space as firms develop, and more specific professional indemnity products.
Given both the challenges and opportunities facing the market, is the insurance industry well-placed to demonstrate its social value? As a “passionate believer” that this social value is the raison d’être for the industry, Trueman highlighted that his team exists to make sure clients can successfully go about their day-to-day business and create wealth in an inherently risky environment, safe in the knowledge that they can transfer that risk across.
“However, we have to do more to enhance our ability to share the vast amount of data and information we hold in a meaningful way that our clients can understand,” he said. “There’s no point understanding the changing risk environments for our clients unless we develop the mediums of delivery for that information.
“We also have to continue to do more than simply being a name on a contract at the end of the agreement. We have to be investing in the promise to protect as well as the promise to pay. We’re an innovative industry but we need to be an industry that takes risks for a living –sometimes I think we can be quite risk averse when it comes to innovation.”
