Global Insurance Report 2025: Searching for profitable growth in commercial lines

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The commercial property and casualty (P&C) insurance industry is facing challenges in finding profitable growth due to macroeconomic uncertainties, inflation, and shifting trade patterns [5][7][9] - The global protection gap for natural catastrophes increased to $262 billion in 2023, highlighting the need for insurers to address widening protection gaps [23][24] - Insurers must reassess their strategies to capture growth profitably as reliance on rising premiums is no longer sustainable [9][17] Summary by Sections Introduction - The commercial P&C insurers are confronting macroeconomic uncertainties, including persistent inflation and geopolitical instability, which may affect growth [5][6][7] Finding Growth Beyond Rate Increases - Premiums in commercial P&C insurance grew by an average of 8% annually over the past five years, with the average combined ratio estimated at 91% in 2023 [13][14] - Growth has primarily been driven by rate increases, with a need to find alternative growth avenues as rates show signs of softening [17][22] Is Demand for Commercial Insurance Growing? - The demand for commercial insurance is not growing fast enough, with significant protection gaps persisting, particularly in cyber insurance [23][24][26] Profitability Can Be Elusive - Specialty lines have shown consistent profitability, but overall profitability remains elusive for many insurers, with combined ratios often exceeding 100% in various lines [28][29] The Challenge: Capturing and Sustaining Profitable Growth - Insurers need to focus on capturing consistent, profitable growth amid market shifts, as performance is driven more by operational execution than by the lines of business [39][45] Four Key Drivers of Superior Commercial P&C Performance - Top-performing insurers exhibit clarity in growth strategies, invest in underwriting operations, reduce acquisition costs, and achieve operational efficiencies [51][52] Leaders Have Clear Strategies to Capture Profitable Growth - Leading insurers are more likely to have clear and targeted growth strategies, which are essential in a changing market landscape [52][53] Insurers Must Have Distinctive Capabilities - Insurers are encouraged to focus on niche markets and specialized products to enhance their competitive edge [53][55] Models Requiring Limited Underwriting Involvement Continue to Grow - The use of managing general agents (MGAs) is increasing, with significant growth in premiums written through MGAs [55] Investors Want Clear Growth Strategies from Insurers - Insurers must articulate clear growth narratives to attract investment, as traditional sources of capital are becoming more challenging [56][57] Generative AI Has Wide Applicability - Insurers are increasingly deploying generative AI to enhance underwriting processes and improve operational efficiencies [65][66] Competition for Talent is Intensifying - The competition for quality underwriting talent is increasing, necessitating insurers to provide advanced tools and analytics to attract and retain talent [66] Insurers Must Navigate a Changing Distribution Landscape - Insurers need to rethink their distribution strategies to improve efficiency and reduce acquisition costs [67] Insurer–Broker Relations Will Become Even More Important - Strong relationships with brokers are essential for insurers to achieve profitable growth in a competitive landscape [69][70] Insurers Should Manage the Quality of Their Distribution Networks - Insurers must ensure diligence in managing their distribution networks to maintain quality and profitability [71] Digital Connectivity is Transforming the Purchase of Insurance - Digital platforms are enhancing the efficiency of insurance transactions, reducing friction between brokers and underwriters [72] Leaders Manage Administration Expenses Through Operational Efficiencies - Leading insurers maintain lower administration expense ratios compared to their peers, but must continue to improve efficiency [74][75]