In an interview with the Financial Times, Gallagher emphasised that underwriters were acting diligently by raising prices in response to the rising cost of claims.
The persistent surge in inflation has reignited a prolonged rally in insurance and reinsurance prices, prompting insurers to adjust premiums to account for the increased expenses associated with home reconstruction and vehicle repairs. This ongoing trend, known as the “hard market,” will persist until the impact of inflation is fully integrated into current profits and incorporated into new business strategies, according to Gallagher. He cautioned that this process would likely take a considerable amount of time.
Insurance brokers play a crucial role in securing insurance coverage for their clients and receive compensation in the form of fees or commissions. With a market value of $45 billion and a global workforce of over 40,000 employees, Gallagher rose to become the third-largest broker by market capitalisation after acquiring the majority of Willis Towers Watson’s reinsurance broking business last year.
Insurers have raised premiums to restore profitability, says Gallagher
The escalation of inflation has significantly affected insurers’ profit margins, leading to profit warnings in various sectors. Last year, property and casualty insurers in the United States collectively experienced a net underwriting loss of $27 billion, marking their worst performance since 2011. To restore profitability, insurers have raised premiums, placing additional financial strain on companies and households as they recover from the pandemic.
Recent scrutiny from UK lawmakers and concerns raised by consumer groups have highlighted the substantial price hikes, particularly in the property insurance market. Gallagher stated that the property insurance market, especially in the US, continues to present challenges. Major insurers like State Farm and Allstate have even suspended offering home insurance to new customers in California due to historic increases in construction costs, mounting catastrophe exposure, and a difficult reinsurance market.
Political landscape plays pivotal role
Gallagher noted that conducting business in various US states, such as California, involves navigating regulatory requirements, including securing approval from regulators for insurance rates. He stressed that it is not solely a matter of financial considerations, as the political landscape also plays a pivotal role. However, he remained confident in the insurability of these risks, given the long history of insuring such perils.
Gallagher called on other states to follow Miami’s lead, as the city has implemented legislation to curb escalating legal costs for insurers. He acknowledged that climate change has contributed to the severity of incidents like the devastating wildfires in California, further emphasising the need to address this environmental challenge.
Founded in 1927, Gallagher is a prominent global insurance broker with a market value of $45 billion. With operations spanning across the globe and a workforce of over 40,000, the company specialises in providing comprehensive insurance solutions to clients worldwide.
