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.
With 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%.
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.