The profitability of the U.S. property/casualty insurance industry is expected to remain under pressure, according to the latest underwriting projections released by Triple-I and Milliman actuaries. Speaking at a members only webinar yesterday, the actuaries said this is due to continued deterioration in personal lines.
The sector’s combined ratio – the most commonly used measure of underwriting profitability – is seen running at an estimated 101.3 combined ratio for 2021. A combined ratio under 100 percent indicates an underwriting profit, and one above 100 percent indicates a loss.
Dr. Michel Léonard, vice president, senior economist, and head of Triple-I’s Economics and Analytics Department, said the industry’s performance continues to be “significantly constrained” by higher-than-average inflation and lower underlying growth.
Dale Porfilio, Triple-I chief insurance officer, noted that the insurance industry had the worst full-year catastrophe losses since 2017 with the Texas freeze, Hurricane Ida, wildfires and tornadoes.
“Healthy premium growth in 2022 and 2023 is possible from an economic recovery and a hard market,” he said, noting however, that uncertainty from COVID-19 continues to put pressure on rates and profitability. “Inflation, supply chain, and riskier insured behavior are also contributing to loss pressures.”
On the personal auto side, Porfilio said the 2021 estimated combined ratio has increased to 99.9 due to deteriorating non-catastrophe loss trends combined with excess catastrophe losses.
“Loss pressures forecast for 2022 and 2023 will likely result in profitability similar to pre-pandemic levels,” he said. “Miles driven are back to 2019 levels, but with riskier driving behaviors such as speeding and impaired driving.”
On the commercial auto side, underwriting losses are forecast to continue through 2023, but improve year-over-year said Dave Moore, president and consulting actuary at Moore Actuarial Consulting.
“We continue to observe a significant rebound in premium growth due to the economic recovery and the hard market,” Moore said. He cited a recent paper published by Triple-I, funded by a research grant from the Casualty Actuarial Society (CAS), that quantifies the impact of “social inflation” on commercial auto liability claims.
“Based on this research, we estimate that social inflation increased commercial auto liability claims by more than $20 billion between 2010 and 2019,” Moore said. “This can be influenced by a variety of factors, including negative public sentiment about larger corporations, litigation funding, and tort reform rollbacks.”
Jason B. Kurtz, a principal and consulting actuary at Milliman, said general liability underwriting losses are expected to continue, but profitability should improve due to rate increases. Looking at the workers compensation line, Kurtz noted that underwriting profits continue, although margins continue to shrink.
“The pandemic recession, remote work, and economic recovery are still impacting volume and location of workers comp risk,” he said. “Claim frequency remains below pre-pandemic levels and if the trend of large reserve releases on prior accident years continues, 2021 is likely to be another profitable year.”
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