The surplus for the private US property and casualty (P&C) re/insurance industry dropped by $75.9 billion in the first quarter of 2020 as the stock market suffered a major down.
This is according to data analytics provider Verisk, who said the drop was the largest ever quarterly decline for the market.
Since Q1, the COVID-19 pandemic has continued to affect many insurers and will likely impact underwriting results for the remainder of the year, the firm added.
P&C surplus fell to $771.9 billion as of March 31, 2020, from the record-high $847.8 billion at the end of 2019.
This drop was mostly driven by a decline in valuations of insurers’ investments that set surplus back to mid-2018 levels, while traditional leverage ratios remained below their long-term averages.
However, Verisk noted that other industry results remained steady or improved from a year earlier.
For example, net income after taxes in first-quarter 2020 was $17.9 billion, essentially the same as in first-quarter 2019, while net underwriting gain in the first quarter was $6.3 billion, a 19.9% increase from a year earlier.
And net written premiums increased to $164.4 billion in first-quarter 2020 from $154.7 billion in first-quarter 2019—a 6.2% increase.
While having no apparent effect on first-quarter underwriting results, the COVID-19 pandemic and associated economic disruptions have affected many insurers, and the impact goes beyond the investment losses reported in the first quarter.
“The historic drop in industry surplus in the first quarter was concerning for many insurers, as it began to show the impact of COVID-19 on their results,” said Neil Spector, president of ISO.
“But the impact of COVID-19 on the industry is just beginning to unfold. Will personal auto insurers see the reduction in losses matching the policyholder rebates and credits offered this spring? To what extent will commercial lines premiums be affected by the challenges facing the economy? How will insurers adapt and continue to serve their customers efficiently in our new normal?”
“Property/casualty insurers started the year with solid net written premium growth, but that was the calm before the storm,” added Robert Gordon, senior vice president for policy, research and international at APCIA.
“By the end of the first quarter, insurers experienced their largest-ever quarterly surplus decline as the stock market suffered its largest drop since 1987 and interest rates reached a record low,” Gordon continued.
“While the industry remains safely capitalized, many individual insurers face potentially significant unknown coronavirus liability exposures, as well as political and regulatory threats of mandated retroactive and prospective COVID-19 coverage.”
