Some more Predictions for 2025.
Complex and volatile geopolitical landscape will drive growing demand for insurance as businesses and governments seek protection against an array of risks, says Jeremy Shallow, Deputy CUO and Head of Specialty at Westfield.
Political volatility will continue to dominate the headlines in 2025 despite elections impacting a considerably smaller proportion of the world’s population. The transition to a Trump presidency has introduced heightened uncertainty, particularly concerning international diplomacy. He takes pride in a maverick approach towards negotiations which keeps everyone guessing.
Efforts to broker a swift resolution to the Russo-Ukrainian conflict may create temporary optimism but carry the risk of sparking further instability if poorly executed.
In Russia, there is an outside chance that internal pressures could escalate into political unrest, with the potential for extraordinary ripple effects. There are signs of pressure building albeit everything has been designed to maintain the status of the current regime. The sparks that could cause revolutions can be insignificant but the consequences incredible and rapid.
In such a landscape, insurance coverage for both political violence and credit and political risk becomes indispensable, as clients seek to safeguard their operations and assets against abrupt disruptions.
The aftermath of any resolution in Ukraine presents both challenges and opportunities. While the region’s insurance market has contracted due to the war, a potential recovery scenario—driven by Western capital investments—will generate significant demand for credit and infrastructure-related coverage. The need for substantial reconstruction efforts could revive underwriting in the region. An enduring peace solution would be essential to encourage the deployment of capital and insurance alongside.
Elsewhere, conflicts in Georgia, Syria, and politically unstable regions like New Caledonia further highlight the rising need for political violence policies. Companies operating in these hotspots will increasingly look for tailored solutions, particularly as civil unrest disrupts supply chains and business continuity. Predicting the next hotspot is inherently challenging but insurance is an excellent solution to this unknown as diverse portfolios can be built across multiple clients.
In 2025, keeping on your toes as the world evolves, alongside disciplined underwriting, will be critical to navigating these challenges while capturing emerging opportunities in a high-demand, high-risk market.
End in sight for financial lines market softening?
Despite persistent overcapacity, widespread political and economic uncertainty plus an uptick in M&A could start to shift pricing dynamics towards the end of 2025, says Mark Fellows, Head of Financial and Professional Lines
The on-going softening in the financial lines market is unlikely to come to an immediate end in the new year but signs are that the picture could start to change towards the end of 2025.
While we will continue to see a huge amount of uncertainty around a number of factors, one thing is sure: broker facilities will continue to expand and overcapacity will remain a key feature of the market in the coming 12 months.
However, while the global economic landscape has been stabilising, this could very easily be reversed.
Political instability in countries such as France, Germany and South Korea, as well as the possibility of the new US administration introducing tariffs that spark a trade war, could reignite macroeconomic volatility. This could lead to inflationary pressure, rising interest rates, an elevated risk of claims, and a consequent increase in insurance pricing.
Irrespective of these threats, signs are that we will see an increase in M&A in 2025. For the past two years transaction activity has been dampened due to high interest rates rendering it difficult to finance deals.
Although interest rates have started to turn downwards, they are nowhere near 2021 levels – nor likely to be anytime soon – but many investors are simply not prepared to wait any longer to cash out. With an uptick in M&A creating more demand for financial lines cover, we could see some upward pressure on rates later next year and into 2026.
Property underwriting has become a sensible business in the wake of challenging years
Pressure for rate relief in the coming year will be met in a measured and disciplined way, says Richard Wood, Head of Property, International Insurance
Looking ahead into 2025 I see an underwriting landscape that remains full of opportunity for us, a market that has seen significant readjustment and improvement over the last four years is certainly now facing changes and adjustments to pricing, but I see very acceptable pricing adequacy with the portfolio and broader market. I believe the changes we have seen within the market during the last couple of quarters reflect the return of confidence within the underwriting community to take and accept risk.
This year, although we saw two major hurricanes this autumn, the costs of both were largely retained by the insurers as opposed to the reinsurance market. Although these hurricanes are estimated to be below the $50bn and they remain earnings events for the industry.
So, into 2025, I see real reasons for measured positivity. The property market has now become significant better capitalised, more stable, coupled with a much sounder understanding of pricing and adequacy of the product. I believe these basic elements lead to a much stronger market which for us is a market we intend to maximise. I accept we will see clients and brokers pushing for rating relief, and my expectation is it will be measured and disciplined.
We will look to write a broad portfolio by occupancy and location and partner with clients and brokers who take a longer-term view of risk, recognising those who invest in the management of risk and look to remove attrition from the market. We intend to build relationship across the cycle to offer stability and predictability within our portfolio and ultimately to our insureds and reinsurance partners.
Four things to watch in the casualty market for 2025
Increased competition, the importance of data, growing focus on US exposures and broker facilitisation are key trends to keep an eye on, says Ross MacDonald, Head of General Liability.
1. Increased competition in key markets
A number of lines of business across the insurance markets have been experiencing a period of softening, and this will be the case in the casualty market in 2025. The surge in competition in London, as well as in key domestic markets for Westfield Specialty such as Canada and Australia, is likely to drive rates down.
2. Importance of data processing
The way that casualty insurers process data will be pivotal in how they navigate a softening market. Efficient data management will enable insurers to better understand the issues and risks they are presented with, enabling them to make informed decisions about rate reductions in a disciplined way.
3. Growing focus on US exposures
Both insurers and reinsurers have increasing focus on US exposures in International Casualty books. Large US operations, excess auto and high hazard products liability exposures are of increasing concern as more class actions and nuclear awards have been seen across the market. Having a strong focus on understanding clients’ operations and managing capacity and exposure – as well as pricing for it – are key to underwriting this part of the book.
4. Broker facilitisation
Brokers are looking at the way they place business in the market and are looking to increasingly use facilities to build books with key insurer carriers. This allows for pooling of risk with a number of insurers which in turn helps manage large losses when they do occur. Alignment of risk appetite between carriers in these facilities is key to allow them to grow, and make them profitable and sustainable in the long term.
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