Insurance economic drivers outperforming overall US GDP: Triple-I

According to a recent insurance economics outlook from the Insurance Information Institute (Triple-I), the economic drivers of the US property & casualty (P&C) insurance industry are growing faster than the nation’s Gross Domestic Product (GDP), and are anticipated to gain further momentum in the event of Federal Reserve monetary rate cuts.

Michel Léonard, Ph.D., CBE, chief economist and data scientist, Triple-I, in the organization’s April 2024 Outlook, commented: “We’ve been forecasting that P/C underwriting growth would catch up on overall GDP and it has. Triple-I forecasts P&C underlying growth to increase to 3.4% in 2024, 1.2% above the Fed’s GDP forecast of 2.2%. It will likely take at least another year for this economic rising tide to lift the P/C industry’s overall growth and performance.”

He added: “Triple-I expects P&C underlying growth to continue outperforming overall GDP growth into 2025 and 2026.”

Moreover, by using the Fed’s GDP forecast as a basis for comparison, it has been revealed, that underlying insurance growth is expected to outperform overall US growth by an average of 2.0% over the next three years.

Léonard continued: “Different economic stress scenarios may reduce or widen the spread between P&C underlying growth and overall GDP growth, or even reverse the overall trend of P&C underlying growth outperforming overall GDP growth.

“The top two risks to underlying insurance growth and overall GDP growth is the Fed slowing or reversing course on monetary easing and renewed geopolitical risk including global supply chain disruptions.”

Importantly, it is worth noting, that Triple-I has been, and remains, more optimistic about growth than the Fed due to the fact that its models put less emphasis than the Fed’s on the negative impact of each additional interest rate increase on GDP growth and the unemployment rate, the report explains.

Therefore, for 2024, Triple-I’s forecast for overall GDP growth sits at 2.6%, compared to the Fed’s 2.2%.

Léonard said that a decision by the Fed to cut interest rates this year, “would provide further tailwind to key insurance underwriting growth such as housing and auto sales.”

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