- U.S. property insurance rates fell 0.94% in Q2, marking the first quarterly decline of any kind since 2017.
- The drop was due to insurers returning to profitability amid fewer catastrophic losses, leading to more competitive pricing.
- If catastrophe losses remain low, further insurance rate declines are expected through 2025.
For the first time in nearly seven years, U.S. property insurance rates have fallen, down 0.94% in Q2, according to a market report from Aon Plc.
As reported in Bloomberg, this decline follows years of significant rate hikes, which reached their peak in the 3Q20 when insurance rates surged over 30%, due to major natural disasters.
Vincent Flood, Aon’s U.S. property practice leader, was optimistic about the rate reduction, noting that both insurers and clients had experienced “rate fatigue” from years of upward pressure. “We, along with our clients, are excited that rates are finally decreasing,” Flood said.
Road to Rate Cuts
After years of frequent natural disasters driving up costs, insurers saw lower catastrophic losses in 2023, allowing them to turn a profit.
This seismic shift enabled insurers to allocate more capital to their property insurance businesses and implement aggressive pricing strategies to attract new clients and grow their portfolios.
In addition, rising interest rates over the past few years have placed further pressure on the property insurance market. Many investors withdrew from the reinsurance market in favor of more attractive investment opportunities, exacerbating the situation.
However, the combination of improved profitability and fewer catastrophic events over the years has provided much-needed relief for insurers.
Future Outlook
Flood noted that if catastrophe-related losses remain limited, insurance rates could keep going down into 2025. “If we were to have a significant event, then I would see the market stabilizing again,” Flood said. “But absent of that, I think we’ll continue to see rates decline in 2025.”
Of course, the potential for a major catastrophic event remains a critical factor. But in the absence of such disasters, policyholders may benefit from sliding property insurance rates in the coming quarters.
