Property-Casualty Growth Factors Could Outpace US GDP by 2025

The economic factors driving the US property-casualty industry's growth could cumulatively expand faster than the country's gross domestic product in 2024, and might outperform the overall US economy by 2025, according to the Insurance Information Institute (Triple-I).

In its latest Insurance Economics Outlook, the Triple-I noted that among the factors influencing property-casualty insurers' underlying growth are replacement costs, consumer and corporate spending, interest rates, and US employment trends.

"Growth drivers specific to P/C performance have been improving faster in 2023 than the rest of the US economy, after underperforming the wider economy 3 years in a row," wrote Michel Léonard, chief economist and data scientist at the Triple-I. "We forecast P/C growth of 2.1 percent in 2023, slightly above our earlier expectation of 1.9 percent. This confirms our expectation from January 2023 that the gap between P/C and overall growth would continue to narrow this year. P/C underlying economic growth should continue to improve over the next 3 years, potentially outperforming the wider economy by 2025."

Between 2020 and 2023, property-casualty replacement costs increased an average of 45 percent while overall US inflation increased 15 percent over the same period, the Triple-I noted. Increase in property-casualty replacement costs should continue to slow faster than overall inflation over the next 3 years, the Triple-I projects. Still, it will take 10 years of normal inflation for insurance replacement costs to process pandemic-related increases, according to the October 18, 2023, report.

"The US economy remains strong regardless of the Federal Reserve's monetary tightening which we continue to see as excessive," the Triple-I report said. The Triple-I's analysis envisions consumer and corporate spending could pick up in the second half of 2024, depending on the Federal Reserve's actions.

The Triple-I said it expects the US unemployment rate to end 2024 at 3.9 percent, below the Federal Reserve's 2024 forecast of 4.1 percent.