•Alliant
City of Riverside
Finance Committee
State of the Insurance Market
April 9, 2025
Presented by:
Robert Lowe
City of Riverside • State of the Insurance Market 2025
Presentation Overview • Financial Performance
• Loss Trends & Market
Disruptors
• Underwriting Trends
• Toward the Future
•Alliant
Market Overview
Financial Toward the
Loss Trends &
Performance Future
Market Disruptors
Cost of climate
Social Inflation/
Market change natural Aging
disasters (wildfires) Nuclear Verdicts Infrastructure
Pressures... & Legislation
Climate Change
Cyber Attacks
Inflation &
Global Political Increased Loss Cost
Mass Shootings
Conflict
The outlook for the next six months is marked by heightened Natural Disasters expectations of potentially costly wildfires and hurricanes, as well as continuing convective storm activity in the United States.
Supply Chain &
Labor Shortage
Proliferation of
"secondary
perils (SCS)
Property/Casualty Insurance Industry Investment Income: 2000-2024F* Higher interest rates are
income sharply upward
Aggressive Fed actions in response to COVID
and recession pushed interest rates lower in
2020, adversely impacting investment income
(S Billions)
550
$50
$40
$30
2° 23E 24F
Due to persistently low interest rates, investment income remained below pre-crisis levels for a decade. Lower interest rates during COVID drove investment income down once again. Fed rate hikes in 2022-23 are reversing this trend. • 2018-19 figures are distorted by provisions of the TCIA of 2017. Increase reflects such items as dividends from foreign subsidiaries 442027 fisuro includes a SID 8R intercomnary detrihutina los boreo rolnauror that Inwon throuch MIlI 1 Investment gains consist primarily of interest and stock dividends. Sources: A.M. Best Review & Preview (March 2024); ISO; University of South Carolina, Center for Risk and Uncertainty Management Alliant P/C Insurance Industry Combined Ratio, 2001-2023F*
As Recently as 2001, Relatively Low CAT Higher CAT Losses, Insurers Paid Out Nearly Losses, Reserve Shrinking Reserve COVID-19 $1.16 for Every $1 in Releases Releases, Toll of Soft has had no nificant improvemer Earned Premiums Market discernable pected in P/C underwrit net impact on performance in 2024/25-led
pre-COVID y Personal Lines ar
Relatively Low CAT expectations for the specially Personal Aut Heavy Use of Losses, Reserve harply higher CAT
romhiner
Reinsurance Lowered Releases e driving lar DRIVERS
Net Losses Sandy underwriting losses ratio in 2020;
120-
Impacts and pricing pressure Inflation moderates
Avg. CAT -7.5 pts. due
115.8 Losses, More to CATs VS. 4.1 late gains outpaci
in 2019 laim cost
Best (about twice avg.)
Combined Releases
Lower CAT lan Impacts
Ratio Since
1949 (87.6) • 2023
417 C
106.5
102 C 102.4
100 g 101.0 101.1 100.7
100 1
100 99.3 989
07.8 95.7
24:01
Pre-COVID 2020 Combined Ratio Est. 99.1 (A.M. Best)
Actual = 98
•Excludes Mortgage & Financial Guaranty insurers 2008-2014.
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Loss Trends & Market Disruptors
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Major U.S Losses in 2024
U.S. 2024 Billion-Dollar Weather and Climate Disasters
• Drouaht/Heat Wave Floodina Hail Severe Weather Tornado Outbreak Tropical Clone@ Wildfire Winter Storm/Cold Wave Central and Northeastern e → Central and Eastern Tornado Severe Weather June 16-23 Outbreak and Severe Weather • In 2024, there were 27 confirmed July 13-16
weather/climate disaster events with losses
Northwest Winter Storm c • Central, Southern, and
January 12-14 Southeastern Tornado Outbreak exceeding S1 billion each to affect United States.
48Y B-9
Colorado Hail Storms and
Southem Severe Wootie
May 31-June 1 • Central and Eastern Severe Weather • These events included 1 drought event, 1 February 27-28
flooding event, 17 severe storm events, 5
Severe Weather • Central Tomado Outbreak and tropical cyclone events, 1 wildfire event, and Fastam Sevara Weather
H00 99-10
April 1-3 2 winter storm events.
Central and Fastern C
Severe Weather • Hurricane Helene
September 24-29 • Overall, these events resulted in the deaths March 12-14
• Central, Southern, and Northeastern of 568 people and had significant economic Southern/Easter/Northwestem e Winter Storm and Cold Wave effects on the areas impacted.
Brough and Heat wat
January 14-17
2024
• Southern Tornado Outoreak and
East Coast Storm • The 1980-2023 annual average is 8.5 events New Mexico Widfires •
AnuaN 8-11 (CPI-adjusted); the annual average for the
June-July
& Hurricane Debby most recent 5 years (2019-2023) is 20.4 Texas Hail Storms
April 27-28 August 5-9 events (CPI-adjusted).
Southern and Eastern e • Hurricane Miton
Severe Weather October 9-10
Severe Weather
February 10-12 - Central Tornado Outbreak
Aon. 8-1
Southem Severe Weather ® Southem Derecho e • Hurricane Beryl • Hurricane Francine May 11-13 May 16-17 July 8-9
This map denotes the approximate location for each of the 27 separate billion-dollar weather and climate disasters that impacted the United States in 2024.
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Distribution of Losses from US Billion-Dollar Weather and Climate Disaster Events, 1980-2024* (CPI-Adjusted)
Cost
$5M-100M Heavy
$100M-250M concentration of
$250M-500M losses in Gulf
Coast states
$500M-1B
and CA
$1B-2B
$2B-5B
$5B-10B
$10B-20B
$20B-50B
$50B-100B
$100B-200B
$200B-300B
$300B+
Allíant
California Wildfires (as of Jan. 21, 2025)
• ~17,000+ structures destroyed/damaged The Getty
Palisades fire
UCIA
~40,000 acres burned across all fires
SECS ANGELES
Santa Monica
27 confirmed fatalities
Santa Monica Pier-
~170,000 residents were under evac. orders
~$32.5B: Insured Loss Est. (midpoint) Uninsurable California? ~$1.9M per claim!
• $250B - $275B: Econ Loss Est.
CA FAIR Plan: Largest Exposure
• Has $2.63B reins., co-reins, assessments
• Issue rapidly politicized, Insurers demonized
anch ok min roar
MAlliant
U.S. Inflation-Adjusted Insured CAT Losses: 1980-2024:H1 $ Billions, 2021 Harvey, Irma,
varia
SISO
S140 Ida ($36B)
Hurricane Katrina, Rita,
TX Freeze ($15B)
S30
Andrew WTC Wilma
$120
$110
lan 2022 became the
lan
$90 2nd costliest insured
($52.5B)
CAT loss ever
$80
$70
$60 57
$50
1990s: $168
$00
r 1980s: 558
$10
02-=-1-00.0.|•| LIDILALLL
Average Insured Loss per Year* The 2020s are off to an ominous start with $83.5B in average 1980-2021: $23.8 Billion | 2012-2021: $44.1 Billion annual insured losses (2020-23) *Stated in 2021 dollars except 2022 -2024 (in current collais) Tigure r on y tanc Senter avon istnale s hueily 00 200-22-25 unestrom (Mand er:202 and2024 1. Alliant Social Inflation: Many Interrelated Causes, Difficult to Manage California is the trial bar's laboratory. It's where they go to pursue innovative new theories of liability and push the envelope with regard to expanding liability for business. The courts welcome these theories with open arms and businesses are overwhelmed with claims. 2023
Nuclear verdicts
Number of reported $23.8 million $21.1 million $88.9 million verdicts over $100 million
hit an all-time Median nuclear verdict ledian nuclear verdict for persor jury/wrongful death cast Miny nuriteat wereat for personal high of at least 23 in 2023
Insurance claim costs
Iil
Increasing Size of Jury Courts/Juries Growing Distrust Litigation Aggressive Changes in Regulatory Propensity to Sue Awards Favoring Plaintiffs of Large Corps. Financing Plaintiff Bar Ads and Legal Environment Churro Rkl andiincos ntu Manaromont Contor imw ni Chuth Cornlina snantontam Voncl Corisl intistinn' nrcomotion I320 Alliant
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Underwriting Trends
Toward the Future
Allíant
Continued scrutiny of data (SOV, COPE, ITV with Increased Construction Cost) • Must go to market with a compelling narrative
Property • Emphasis on data quality will not be going away any time soon Renewal
Increased retentions and caps on certain types of exposure Outlook • Programs that have not undergone changes over the course of the last few renewal cycles may face scrutiny, particularly on Windstorm & Severe Convective Storm
• Separate, increased Water Damage deductibles are gaining momentum Rate outcomes are highly dependent on remainder of 2024 Wind Season and individual client losses Underwriter submission activity remains high - imperative to engage early and access global market Regional Underwriting: Property markets are affected differently across the nation • e.g., West: Wildfire/Earthquake, East: Hurricanes, Midwest: SCS, etc.
The Los Angeles fires are expected to have significant consequences for both the insurance and reinsurance markets.
Large poses or the lose sund eyed solel, in withing the greming serage bo reaching up to 5250 blin. A Liability Claims frequency has increased
• Third-party litigation funding (TPLF)
• Aging Infrastructure
• Dissatisfaction
Liability Claim Trends
and Inflationary
Liability Claim severity has increased
Pressures
• Social Inflation (legal system abuse)
• Medical Cost Inflation
• Plaintiff Bar Success - Advertising, Reptile Theory, etc.
Inflation Toll
• As inflation increases, Insurance Carriers seek increased premiums • Higher claims payouts, operational costs, etc.
• Investment Portfolio is impacted
• Claims more likely to approach retention levels, retentions increases are common Allíant
Ransomware losses continue to MetaPixel and Movelt claims be a major concern, as it is the have skyrocketed and as such, #1 cybersecurity threat to all underwriters are adding
businesses exclusions to those withou
sufficient controls
Select U.S. markets have begun As the war in Ukraine
inserting "widespread event' or continues, London
'catastrophic first party loss' underwriters are all deploying exclusions on their renewals prietary/Lloyd's v
Cyber Market - Cyber lusion langua
Liability Claims Trends
Despite some groups Expected increase in state and
conducting politically- federal regulations and cyber
motivated ransomware and related enforcement actions
data extortion attacks the vast
majority of ransomware and
data extortion attacks continue
to be financially motivated.
Fewer of these attacks involve
encryption (locking) of data
compared to years past
Factors
Factors serving as cost drivers resulting increased claims severity Contributing to
Record
Workers'
Compensation $E
Claims Severity
Medical Acciden Life Expectancy Fee Schedules
Technology Survivability
-il.
Presumption The Job Market Vendor Labor Comorbidities
Laws Shortages & COVID-19
Source: Safety National
Allíant
Successfully
Navigating the
Market
Proactive risk management and strategic pl re atthe core of fostering business resilience
Placement
Information Meetings Relationships Start Early New Capacity Restructuring Enhancements
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Thank you!
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