Analysts at KBRA believe that the property and casualty (P&C) re/insurance industry could report a combined ratio of below 100% in 2020, which would mark the sixth sub-100% year in the last decade.
If a combined ratio of below 100% is achieved in 2020, this would be the third consecutive year under 100% for the industry, and the second three-year streak in 10 years.
The three-year period ending in 2015 was the first time since 1973 that the P&C industry had three consecutive years with combined ratios at this level, KBRA noted.
The agency attributes the performance to ongoing improvements in premium pricing, underwriting tightening, enterprise risk management, corporate governance, and technology enhancements.
Lower catastrophe losses and continued improvement in the personal auto market since 2016 were also significant drivers of underwriting performance in 2019.
In addition, double-digit premium growth and continued prior-year reserve releases have had a favourable impact.
The US P&C market continues to show signs of hardening, but KBRA notes that there has not been widespread constrained capacity or material tightening of policy terms and conditions as seen in prior hard markets.
Premium price increases, which began in 2017 and expanded across most lines excluding workers’ compensation, continued climbing through 2019 and are expected to rise further in 2020.
According to Willis Towers Watson and USI, lines expected to see the most rate increases in 2020 include catastrophe exposed risks with and without losses, directors and officers (D&O) public company (primary) and private company, auto liability and umbrella/excess.
“We are seeing the biggest upward price shift in years,” said Joe Peiser, Global Head of Broking at Willis Towers Watson.
“We expect rate hikes and capacity constrictions will continue throughout 2020 and likely into 2021, but a more orderly market to emerge by mid-2020,” he added.
