Reflecting the impact of major catastrophes in 2017, the U.S. property and casualty insurance industry has fallen to a net underwriting loss of $20 billion for the first nine months of the year, according to rating agency A.M. Best.
The data is based on P&C insurers preliminary results, but the number dwarfs the $2.3 billion underwriting loss the sector suffered in the same period of last year.
Catastrophes are the main driver of this underwriting decline, with the losses “overshadowing underlying industry fundamentals” according to A.M. Best.
A.M. Best sees the losses suffered as the highest in years, with estimated catastrophe losses of $38.4 billion that are 89.1% higher than the same period of 2016 and even surpass A.M. Best’s full-year 2012 catastrophe loss estimate of $36.1 billion, which included Superstorm Sandy.
2017 is set to be the worst underwriting year in five at least, with the catastrophe losses adding 9.8% to the combined ratio, which deteriorated by 4.3% from the prior-year period to 104%, which A.M. Best says is the worst first nine-month period of the past five years.
Reinsurance helped to reduce the impact of catastrophe losses considerably for the group, demonstrating the beneficial role that reinsurers play in helping P&C insurers to better manage their losses.
As a result of the losses, the P&C insurance sectors net income declined 25.5% to $22.9 billion, compared with the prior-year period.
But, still the industry managed to grow its surplus, reaching $699.8 billion at the end of September 2017, driven by an $11.2 billion increase in unrealized investment gains, a slight increase in other surplus gains and a 20% reduction in stockholder dividends.
A.M. Best notes that the fourth-quarter is not going to lessen the load for U.S. P&C insurers, particularly as the California wildfires are set to drive further losses through the group of companies, as well as a more minor impact from hurricane Nate.