P/C Industry Outlook: Challenging

The outlook for the U.S. property/casualty industry in 2012 is a challenging one, according to I.I.I. president Dr. Robert Hartwig.

In his commentary on the industry’s 2011 year end results, Dr. Hartwig says:

The outlook for 2012, given the continued potential for high catastrophe losses, the prospect of high underwriting losses associated with non-cat losses and more uncertainty in the investment markets, is for a challenging year for insurers.†

The U.S. property/casualty insurance industry turned in a relatively weak performance in 2011 in terms of underwriting performance and overall return on average surplus, Dr. Hartwig notes.

High catastrophe losses, along with high underwriting losses in key non-catastrophe exposed lines such as workers compensation, helped push the industry’s combined ratio to 108.2 – its highest level since 2001.

Meanwhile, the industry’s annualized statutory rate of return on average surplus fell to 3.5 percent last year, down from 6.6 percent in 2010.

Dr. Hartwig comments:

Notably, underwriting losses more than tripled to $36.5 billion last year, up from $10.5 billion in 2010, resulting in the second largest annual underwriting loss ever, behind the $52.3 billion underwriting loss in 2001.†

The industry’s profitability receded despite a surprising $2.8 billion, or 5.2 percent, improvement in investment earnings and a 3.3 percent increase in net premiums written, the strongest growth since 2006.

Overall net income after taxes (profits) in 2011Â  dropped 46 percent to $19.6 billion from $35.2 billion in 2010.

The industry’s results were released by ISO and the Property Casualty Insurers Association of America (PCI).

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