Slow underlying growth and inflation are among the biggest challenges facing U.S. P&C insurers in 2023, suggest analysts at the Insurance Information Institute (Triple-I).
According to Triple-I, P&C saw its cyclical underlying growth rebound fail to materialise in H2 2022 as interest rate tightening depressed housing starts, corporate spending, and vehicle expenditures.
Dr Michel Léonard, CBE, Chief Economist and Data Scientist, Triple-I, commented, “We expect long-term growth to remain below 2% and long-term inflation to remain above 2.5%.
“A recovery by year-end 2023 remains unlikely as the Fed continues its hawkish policy and bond yields increase.
“However, the Consumer Price Index is likely to decrease as pandemic supply chain disruptions ease, and commodity and energy prices reach a precarious war-time equilibrium.”
Triple-I is more optimistic than the U.S. Federal Reserve when it comes to the U.S. Gross Domestic Product (GDP), forecasting the nation’s GDP to grow slightly above Fed expectations between 2023 and 2025.
The firm’s analysts note that macroeconomic fundamentals for P&C insurers are forecast to be mixed for the balance of this year.
Increases in P&C replacement costs (vehicle parts, housing construction materials) slowed down over 2022’s last two quarters but are up 40% since 2019.
Dale Porfilio, Chief Insurance Officer, Triple-I, said, “Property and casualty insurer net premiums written are forecast to continue to grow due to hard market conditions regardless of slowing underlying growth.
“Underwriting losses, however, are expected to persist, driven by challenging results in personal lines.”
