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The chief executive of one of the world’s biggest privately owned insurance brokerages has said commercial insurance prices should level off this year, describing “green shoots” for clients that have been squeezed by 25 consecutive quarters of rising premiums.
Speaking to the Financial Times, David Howden, founder and chief executive of insurance and reinsurance broker Howden, predicted the price of business cover would flatten this year as the supply of insurance and reinsurance recovers.
“We’re now beginning to see some green shoots,” said Howden. The challenge, he added, is that there has been “a shortage of new capital coming into the market.” He predicted that more would come from areas such as insurance-linked securities — where investors put their capital against insurance risks — leading to a “levelling of pricing”.
This, he said, would ease some of the pain for Howden’s business clients from what he called the “hardest insurance market we’ve ever seen”, after inflation, war and wild weather sparked a pullback by insurance and reinsurance firms. A hard market, in industry parlance, is a period of rising prices where supply falls significantly behind demand.
According to an index from insurance broker Marsh, global commercial insurance rates rose in the fourth quarter of 2023, the 25th consecutive quarter of rate increases. Property insurance rates, a particular source of pressure, were up another 6 per cent, and overall prices grew 2 per cent.
Rising premiums have lifted the fortunes of insurance brokers, who take home a proportion of the premium as commission. Howden grew its revenues by a third year on year to £2.4bn in the year to September 2023, in numbers released this month.
Organic revenue growth of 13 per cent was complemented by 56 acquisitions. It now employs 16,000 staff across 50 countries and the completion of its acquisition of TigerRisk gave it a significant reinsurance broking business.
The group’s hiring strategy got it into hot water last year when it accepted that it, and certain executive officers, had “engaged in unlawful recruitment” of about 30 employees from reinsurance broker Guy Carpenter, and paid an undisclosed settlement.
Howden said the progress of his group and others such as US-listed rival Gallagher had led to a broadening of competition in the highest reaches of insurance broking, almost three years after US regulators scuppered a combination between two of the biggest brokers on concerns over market concentration.
“There’s definitely more choice for clients 1708238420,” said Howden. “If you look at the reinsurance side, there were really three [big] reinsurance brokers for donkey’s years. We now talk about there being four tier-one reinsurance brokers, and we are one of them.”
Employee ownership accounts for a third of Howden’s shares, alongside external minority shareholders including private-equity groups General Atlantic and Hg. Howden recently completed a $7bn refinancing, including raising its first high-yield bond, as it took advantage of calmer debt markets.
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