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Insurance brokers poised for another strong quarter despite some deceleration: Goldman Sachs

by Cedric Guzman

The latest report from Goldman Sachs has shed light on a positive outlook for insurance brokers in the Americas as they head into the third quarter of 2023. Despite expectations of some deceleration in growth, brokers are set to enjoy above-average organic growth, thanks to a favorable broking environment.

Several factors contribute to the ongoing success of insurance brokers in the region. One of the central factors influencing the anticipated deceleration in growth is a decrease in property premiums, particularly in Property Catastrophe (CAT) business. This shift in the business mix towards lower property premiums is expected to result in sequential growth deceleration. However, retail property and casualty (P&C) globally are still expected to deliver strong results, with reinsurance brokerage projected to see high-single-digit to low-double-digit premium growth, albeit a decrease from the first half of the year.

The report highlights a firm P&C pricing cycle, a unique inflationary environment, and a tight labor market as factors driving growth for insurance brokers. Moreover, employee benefits are expected to contribute to overall organic growth, offsetting some wage increase and employment growth challenges.

While property pricing is witnessing robust increases, driven by more frequent and severe weather events and higher Property-CAT reinsurance pricing, not all segments are experiencing such positive pricing trends. Workers’ compensation and public Directors & Officers (D&O) pricing are facing headwinds, with an uptick in D&O business in the second half of the year. Cyber pricing, while still positive, has seen a slight deceleration.

The report also acknowledges some divergence in pricing data, with various indices providing different views on pricing trends. However, overall, the expectation is for modest pricing deceleration, driven by factors such as inflation and its longer-term impact on reserves. Insurers are likely to continue seeking price increases at relatively similar levels due to the uncertainty surrounding inflation trajectories.

Despite the anticipated deceleration in growth, the insurance broking industry in the Americas remains well-positioned for long-term success. With favorable market conditions and a strong outlook for organic growth, insurance brokers can navigate the challenges ahead and continue to thrive in the region.

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