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S&P underlines US P/C insurers’ resilience during the pandemic

21st January 2021 - Author: Staff Writer

S&P Global Ratings expects underwriting results to remain resilient in 2021, supported by continued rate increases in most commercial lines but partly offset by more competitive rates in personal auto.

S&P Global RatingsWith social distancing measures likely to remain in place well into 2021, analysts expect claims frequency trends to be muted.

Assuming a normalised level of catastrophe losses analysts anticipate an industry combined ratio of 98%-100%.

Considering the massive economic dislocation the pandemic caused, industry underwriting results are reported to have held up remarkably well in 2020.

Based on S&P Global Market Intelligence data, the industry’s statutory combined ratio was 99.0% for the first nine months of 2020, up only slightly from 98.1% during the same period in 2019, and better than the five-year average of 100.2%.

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An increase in policyholder dividends added 0.7 points to the 2020 ratio and accounted for most of the year-over-year change, and a 0.3 increase in the expense ratio accounted for the rest. The loss ratio was unchanged at 70.7%.

Catastrophe loss data and prior-year reserve development are not yet available for the nine-month period. However, the six-month industry results for the first six months of 2020 published by ISO suggest improvement in the underlying loss ratio of 3-4 points. Analysts expect much of this improvement was in the auto lines.

Top-line growth slowed somewhat as DPW rose 2.2% in the first nine months of 2020 period versus 4.8% in the prior year period, though net premiums written (NPW) grew 3.0% versus 2.6% as insurers reduced premiums ceded to reinsurers by about 5%.

Analysts note how the most noticeable changes were in workers’ compensation, with DPW down about 8%, and in other liability, with DPW up about 10%.

The change in workers’ compensation premiums reflects a multiyear decrease in rates in response to lower claims frequency.

A decline in payrolls in the second and third quarters of 2020 likely also contributed to the drop.

Other liability includes several products, but companies have been aggressively raising rates in D&O and excess casualty, so rate increases likely contributed most of the growth in this line.

Estimated personal auto DPW fell about 1% as premium rebates apparently offset the rate increases taken in 2019 and early 2020.

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