According to Verisk and American Property Casualty Insurance Association (APCIA), private property & casualty (P&C) insurers in the United States saw their net income increase in the first quarter of 2021 compared to the previous year, while their combined ratio worsened.
The report noted that insurers’ net income after taxes increased to $20 billion from $17.9 billion a year earlier in Q120.
This growth was fuelled by an increase in realised capital gains and a modest rise in earned premiums from a year earlier.
However, insurers’ overall and underwriting profitability deteriorated. Insurers’ combined ratio, which is a key measure of losses and other underwriting expenses per dollar of premium, worsened to 96.1% for the first quarter 2021 from 94.9% in the first quarter of 2020.
Insurers also saw a modest dip in their annualised rate of return on average policyholders’ surplus to 8.7% in first quarter of 2021, from 8.8% a year earlier.
Neil Spector, president of ISO at Verisk said: “While the insurance industry’s net income grew significantly in the first quarter of 2021, underwriting results suffered, due in part to severe weather in Texas.
“Those catastrophe losses are a stark reminder that even as we emerge from the pandemic, challenges may lie ahead. Precision underwriting, enhanced loss controls, and comprehensive risk management and resilience strategies remain critical for insurers.
“Robust data and advanced analytics can be force multipliers for insurers, helping them achieve a more accurate understanding of the risk environment to support their strategic decisions.”
Robert Gordon, APCIA senior vice president, policy, research and international added: “The insurance industry survived severe pandemic challenges in 2020 only to start 2021 with a record freeze in Texas, extreme tornadoes and floods, an unprecedented heatwave in the West fuelling intense wildfires that are on track to exceed 2020’s record, and expectations of above-average hurricane activity this year.
“Reserve releases for prior years’ business accounted for virtually all Q1 underwriting gains, while slowing premium growth was unable to keep pace with spiking losses and loss expenses. Industry statutory surplus gained significantly as investments improved in the year following the precipitous decline at the end of Q1 2020.
“But insurers now face significantly increasing inflationary costs, including medical care, auto repair, building materials and labour all exceeding the underlying consumer price index. Long-term pandemic liabilities are also still unclear, with continued growth in COVID variants globally and unknown medical costs for long-haul COVID victims.”