Year in Review 2024

As 2024 comes to a close, it's the perfect time to reflect on the year and give a whistlestop tour of the last 12 months along with some key events in 2024 impacting the global economy and general insurance market.

“Global challenges”

As we reflect on 2024, the global economy faced a year of shifting dynamics. Key themes such as AI, climate, energy, elections, ongoing conflict and global security dominated. Global fragmentation was also a prevalent theme identified at the Davos World Economic Forum in January, where United Nations Secretary-General Antonia Guterres commented, “Geopolitical divides are preventing us from coming together around global solutions for global challenges.”

A ‘soft landing’ for the global economy?

With geopolitical instability posing a risk to global and domestic growth, the International Monetary Fund’s (IMF’s) most recent World Economic Outlook entitled ‘Policy Pivot, Rising Threats,’ outlines global growth expectations of 3.2% in both 2024 and 2025. Rate cuts are ‘poised’ to continue, inflationary pressures will ease, growth will be modest, while geopolitical risks ‘remain threats to global stability and growth,’ according to the Outlook.

Resilience in many regions has been a theme. The IMF’s report cites, ‘The global battle against inflation has largely been won, even though price pressures persist in some countries… Despite a sharp and synchronized tightening of monetary policy around the world, the global economy has remained unusually resilient throughout the disinflationary process, avoiding a global recession.’

In November, finance leaders and central bank governors from developed and emerging economies met in Washington to discuss the financial landscape, during which they issued a statement expressing optimism, ‘We observe good prospects of a soft landing for the global economy, although multiple challenges remain.’ Praising ‘well-calibrated monetary policies’ that have helped to control inflation, the finance professionals spoke about a joint commitment to resist protectionism to support fair and open global trade - a statement likely to be directed at the incoming US President.

The year of the election…

Almost half of the world’s population voted in national elections in 2024. Incumbent parties generally performed badly, with some ousted, others forced into coalition and others cohabitation. Such a significant theme in the year, political transitions pose a challenge both globally and on home shores. Many of these elections have long-standing ramifications, not just for the electorate but also for reshaping global geopolitics for years to come.

Top Trumps

The most significant election the world saw in 2024 was undoubtedly the US presidential election in November. Donald Trump made a triumphant comeback to be voted 47^th President, with the Republicans securing a decisive victory, (Harris 226, Trump 312) whilst also securing control of the US Senate and House of Representatives.

Key focuses for his administration will include trade and climate change policies, the war in Ukraine, tax and immigration, on which Trump has pledged to launch a mass deportation campaign. Concerns are heightening that his potential tariff proposals could ignite a fiercer trade war with China and US allies, while his plans to reduce corporate taxes and implement a variety of other tax cuts could propel US debt. Trump will be inaugurated on 20 January 2025.

The new government on home turf deliver a taxing Budget

Following weeks of intense campaigning, as widely expected, the Labour Party secured a landslide victory in July (LAB 412, CON 121, LD 72). New Chancellor Rachel Reeves’ maiden Budget in October created waves for individuals and businesses alike, during which she announced £40bn of tax rises.

Described as a ‘tough’ Budget for business, an increase in employer National Insurance Contributions from April 2025 brings an unwelcome cost burden. A significant personal finance announcement was that most unused pensions will be brought into a person’s estate for Inheritance Tax purposes from 6 April 2027, prompting a rethink of retirees’ decumulation strategies. The Chancellor expects 8% of estates will be impacted annually.

And from April 2025, the non-dom status will be abolished and replaced by a new residence-based system. The change marks a pivotal shift in the government’s approach to tax policy and is expected to raise £12.7bn over the next five years.

A snapshot of 2024 in numbers:

• Global headline inflation - is expected to fall from an annual average of 6.7% in 2023 to 5.8% in 2024 and 4.3% in 2025, with advanced economies returning to their inflation targets sooner than emerging market and developing economies (IMF)
• Global unemployment - is estimated at 4.9%, a slight decrease from 5% in 2023 (ILO)
• Top 5 largest global economies (by GDP in 2024) - US ($29.17tn), China ($18.27tn), Germany ($4.71tn), Japan ($4.07tn) and India ($3.89tn) (IMF)
• And the 6^th largest global economy (by GDP in 2024) – UK $3.59tn (IMF)
• 2024 India election - the world’s most populous democracy held its general election over a seven-phase period that lasted 44 days!
• Donald Trump will re-enter the White House – at the age of 78, the global debate about political age limits is expected to intensify in 2025 (The Economist)
• Energy Transition - renewables accounted for over one third of global electricity generation, a record high (IEA)
• Population milestone - the global population reached 8.2 billion in 2024, with growth concentrated in Asia and Africa. The world’s population is expected to continue growing for another 50 or 60 years, reaching a peak of around 10.3 billion people in the mid-2080s (UN)
• Global AI market - stands at $235bn, with projections indicating a rise to over $631bn by 2028, underscoring its significance (IDC).

And how about the insurance sector in 2024…

2024 was a mixed year for the insurance sector, as increased weather-related claims and affordability concerns went head-to-head with advances in technology, notably the rise of artificial intelligence (AI). This review looks at the key themes from the past year and what might be in store for the year ahead.

A record year

2024 looks sure to be a record-breaking year for the insurance industry. For a fast-paced industry in an   ever-changing world, progress in the industry, whether technological or in terms of claims and payouts, should come as no surprise. However, the extent of change has still caught some industry insiders by surprise.

Insurers paid out £4.1bn in the first nine months of 2024 (ABI), the highest total for the first three quarters of any year on record. Claims were up 15% compared to the same period in 2023, with analysts pointing to adverse weather as a major reason for higher home insurance claims.

The size of payouts has been another dramatic talking point. Indeed, the average payout per home insurance claim climbed 13% quarter-on-quarter to reach a record high of £6,002 in Q3 2024.?This figure is also 33% higher than a year earlier.

Bumps in the road

Alongside record payouts, the insurance industry has had to contend with several notable challenges in 2024. Particular pressure points in the past year have included a rise in claims related to climate change events and new regulatory measures, most obviously the full implementation of the Financial Conduct Authority’s new Consumer Duty rules.

Adverse weather effects

With 2024 ‘certain’ to be the hottest year on record, the worsening climate crisis is inevitably playing out in the form of more and more damaging weather events. For six consecutive quarters, weather-related claims have been above £100m. In Q3 2024, damage to homes from storms, heavy rain and frozen pipes soared to £136m.

Insurers are having to choose between keeping premiums at a low level to attract consumers, which runs the risk of taking climate risk into account, or raising premiums to take into account the large

payouts for severe weather events, which could cause more businesses and consumers to go uninsured.

Tech takeover?

Throughout the economy, the past year has been characterised by the breakout of Generative Artificial Intelligence (GIA). In insurance too, technological advances are altering the landscape.

For all the media attention on AI, consumers are still not fully embracing the technology. Almost half of UK respondents to Guidewire’s 2024 European Insurance Consumer Survey said they are uncomfortable with AI determining insurance prices without human intervention. Only one in three are comfortable with AI assisting in filling out insurance documents and completing a policy application. Interestingly, though, respondents who have made a claim in the past year had more confidence in AI than those who had not.

What’s next for insurance?

Amid the uncertainty and challenges, a major positive is that the sector is seen as an attractive employer. This is especially true for younger workers, who were more likely to agree that ‘the insurance sector is innovative and exciting to work in’. A major cause of optimism for the future of insurance!

We look forward to working with you in the year ahead. Here’s to a happy, healthy and prosperous 2025!