In 2023, the Property and Casualty (P&C) insurance industry experienced challenges and opportunities that are poised to shape the market for the coming 2024 year for insureds.
The market contended with the growing role of technology, increased regulatory requirements, climate change issues, social and economic inflation, and natural catastrophes (NAT CAT) losses. The NAIC reported that these NAT CAT losses and inflationary pressures resulted in a 70 percent decrease in net income from the prior year. Making it the largest mid-year underwriting loss in ten years. These events do tend to impact future underwriting models.
In this article, we will highlight from an insurance perspective how four of these challenges will impact insureds and their insurance policies in 2024.

The year 2023 started with anticipation that regulatory bodies were poised to propose or enact regulations on prevailing issues concerning climate change, cybersecurity managements, cybersecurity reporting, and data privacy and this is what transpired.
Environmental, Social and Governance (ESG)
ESG has been a hot topic that affects all enterprises as regulatory bodies and policymakers are enacting or proposing disclosure requirements on sustainability and ethical factors concerning environmental issues, climate change, greenhouse gas emissions, workforce treatment and diversity, impact on local communities, and overall corporate governance.
Although the US Securities and Exchange Commission (SEC) proposed update to disclosure requirement on ESG in March of 2022, has not yet been enacted, other lawmakers, consumers, partners, stakeholders, and investors are all expecting companies to share reliable reports or show how these requirements are being met especially if they are claiming to be meeting them.
This means that the ESG risk and associated regulatory risks could increase for corporates and their officers. While insurers see opportunities in this challenge and have shown growing interest in developing products to mitigate the risk, there are still gaps in capacity.
Nonetheless, we are beginning to see solutions increase for insureds in this area. For instance, insurers are expanding their policy language or adding coverage to their Directors & Officers (D&O) policies to address certain ESG risks that insured entities and their officers may incur. Note that the policy language is not intended to respond to noncompliance.
Cybersecurity Regulations
On September 5, 2023, the SEC enacted its final proposed cyber disclosure rule for public entities. The new rule addresses areas of cybersecurity risk management, strategy, governance, and standardized incident reporting requirements.
Risk management and strategy - The rule requires public entities to establish a comprehensive cybersecurity risk management program that specifies processes and procedures of assessment, identification, and management of material risks from cybersecurity threats. They must also address whether any risks from cybersecurity threats have materially affected or are likely to materially impact their business strategy, operations, or financial condition.
Governance - Public entities must specify how management and the board of directors oversee, assess, and manage material risks from cybersecurity threats as well as describe their roles in the process.
Cybersecurity Incidents Reporting - Public entities are expected to file a Form 8-K within four business days of ascertaining a material cybersecurity incident. The report must include a description of the nature, scope, timing, and impact or reasonable likelihood of impact of the incident. Other forms, such as Form 20-F and Form 6-K are also required where applicable. It is important for business entities to familiarize themselves with these requirements and to know which forms to file and when they apply.
An entity could delay reporting only if the United States Attorney General determines and states that immediate disclosure would pose a substantial risk to national security or public safety.
While this SEC rule applies only to public entities, several states have already or are enacting laws to enforce cybersecurity standards. The new rules and laws do increase the regulatory risk for business entities. The challenges lie in understanding all the requirements from the various policymakers and regulatory bodies and to determine the right means of compliance to them.
It is thus imperative for business entities to consult their legal specialists for directions. However, they should also develop robust risk management programs including cybersecurity risk management and buy broad cybersecurity risk insurance. This will go a long way to help business entities manage this risk and stay compliant.
Natural Catastrophes Losses
As aforementioned, the mid-year NAT CAT losses were significant enough to generate near record net income losses for insurers. In correlation with NAIC’s statement, Swiss Re Institute also reported that the high frequency of events cumulatively resulted in significant insured losses that were expected to exceed the $100 billion threshold for the fourth consecutive year.
Table 1: 2023 and 2022 estimated total economic and insured losses.
(Loss figures are in US$ billions)

In view of how markets respond to losses, these increasing loss trends are expected to initiate insurance premium adjustments. In essence, insurers will take a critical look at risk exposures with high loss frequencies located in high-risk areas to apply commensurate premium rates.
Social Inflation
Social Inflation coupled with what is viewed as hyper punitive (nuclear) verdicts continue to influence premium rates. In some instances, driving insurers to reduce insurance capacity or avoid certain classes of business particularly, commercial trucking insurance where litigations are frequent and punitive verdicts continue to rise.
Why is social inflation and not economic inflation a factor? A recent study by Insurance Research Council explains how losses across several lines of insurance have increased quickly compared to economic inflation in recent years. Another study by Insurance Information Institute and Casualty Actuarial Society reviewing commercial auto liability, medical professional liability, personal auto liability, product liability and other claims-made and occurrence liability lines, discovered that between 2010 and 2019, social inflation was responsible for increasing claims for commercial auto liability by over $20 billion, roughly 14 percent of all losses in that line. The trend was similarly evidenced in medical malpractice lines.
The effect of social inflation on insureds is that when capacity from insurers is restricted on certain classes, premiums and overall insurance costs tend to increase in those lines where they are most prevalent - i.e., commercial auto, product liability, directors and officers, medical malpractice, and professional liability. Nonetheless, the market generally remains competitive for certain attachment points and risk sizes.
Note: While the definition of social inflation may vary, the general premise as defined by Insurance Information Institute "refers to the impact of rising litigation costs on insurers’ claim payouts, loss ratios, and, ultimately, how much policyholders pay for coverage."
What can insureds do?
The general outlook for insured is that insurance premiums will be reflective of the quality and distributions of the Insured’s exposure, the loss data, the coverage, the market condition, insurers’ prevailing risk appetite and available capacity.
For medium and small businesses, prices are expected to stabilize with consideration for insureds who have favorable risk profiles. Insureds with excessive losses and high-risk exposures can expect some difficulties as insurers’ minimum premiums may increase or become too high to justify the size of the exposure particularly for small businesses. That being stated, there is a solution to every problem.
Insureds should be proactive in their enterprise risk management programs and activities as a first step to managing their risks. Begin insurance procurement process early by gathering and assessing all risk exposures accurately. We offer a free insurance checklist for starters in preparation for renewals or new insurance procurement. Lastly, insureds should seek help when shopping for insurance and should consult their broker or agent.
At Axios Risk Solutions, LLC., we help small and medium-sized enterprises, families and individuals minimize and manage their business risks through tailored risk management strategies and protect their business and assets through a variety of insurance solutions in the market. To request a quote or speak to a broker, call us at (404) 480-0272. ​
Author: Sandra Owusu-Fianko
Sandra Owusu-Fianko is the Principal and Risk Advisor at Axios Risk Solutions, LLC. She has extensive experience in the insurance industry and a MS degree in Enterprise Risk Management. She is passionate about finding appropriate risk management and insurance solutions for her clients.