P&C exceeds US GDP, with further momentum on the horizon – Triple-I | Insurance business America
Still, be wary of economic stress, analyst says
Property
By Kenneth Araullo
The latest Insurance Economics Outlook from the Insurance Information Institute (Triple-I) shows that the U.S. property and casualty insurance industry is now growing at a rate that exceeds the country’s gross domestic product (GDP). The Reserve is implementing interest rate cuts.
“We predicted that property and casualty insurance growth would reach total GDP, and that is the case,” said Michel Léonard, chief economist and data scientist at Triple-I.
“Triple-I forecasts underlying P&C growth will rise to 3.4% in 2024, 1.2% above the Fed’s GDP forecast of 2.2%,” Léonard said. “It will likely take at least another year for this economic recovery to boost overall P&C industry growth and performance.”
Looking ahead, Léonard also noted that the P&C industry is expected to continue its strong performance relative to the broader economy.
“Triple-I expects underlying P&C growth to continue to exceed overall GDP growth in 2025 and 2026,” he explained.
According to the report, based on the Fed’s GDP forecasts, insurance growth is expected to outpace U.S. economic growth by an average of 2.0% per year over the next three years.
Be careful with growth
Despite the growth, Léonard also warned that various economic stress scenarios could have an impact.
“Various economic stress scenarios can narrow or widen the spread between base P&C growth and overall GDP growth, or even reverse the general trend of base P&C growth exceeding overall GDP growth,” he said.
Léonard identified the possible change in Federal Reserve monetary policy and renewed geopolitical risks, including global supply chain disruptions, as the main risks to sustainable growth.
Triple-I’s forecast for GDP growth in 2024 is 2.6%, slightly more optimistic than the Federal Reserve’s forecast of 2.2%. This optimism, says Léonard, comes from the Triple I models, which, compared to the Fed’s models, place less emphasis on the negative impact of interest rate hikes on GDP growth and the unemployment rate.
Léonard noted that a possible Fed rate cut later this year could significantly strengthen sectors important to insurance, such as real estate and auto sales, which could provide a further boost to the P&C industry’s growth trajectory.
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2024-04-12 15:01:16
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