New data from Verisk and the American Property Casualty Insurance Association (APCIA) shows that key financial results for the US property and casualty (P&C) market significantly worsened in 2022, as its overall underwriting loss reached $26.9 billion.
At this level, the underwriting loss was more than six times the $3.8 billion loss in 2021, and is the largest the industry has seen since 2011, Verisk and APCIA note.
At the same time, the data shows that the US P&C market’s net income fell to $41.2 billion in 2022, compared to $62.1 billion a year earlier – a 33.6% decline.
Furthermore, incurred losses and loss adjustment expenses grew 14.1% while earned premiums grew 8.3%, and the combined ratio deteriorated as well, to 102.7% in 2022, from 99.6% in 2021.
Verisk and APCIA based their analysis and estimates on annual statements filed by insurers with insurance regulators, which represent about 94% of all business written by US P&C insurers.
“The insurance industry is being hammered by increasing input costs, natural catastrophes, legal system abuse, and resistance in some states to adequate rates,” said Robert Gordon, senior vice president, policy, research & international for APCIA.
“Insurers suffered a 14.1 percent increase in incurred losses and loss adjustment expenses (16.6 percent in Q4), contributing to a more than $76 billion contraction in insurers’ surplus at a time when loss exposures are rapidly growing,” Gordon continued. “In 2023, insurers are faced with a significant challenge to close the rate gap in order to meet their growing cost of capital.”
Neil Spector, president of underwriting solutions at Verisk, also commented: “Hurricane Ian and the effects of inflation resulted in major losses for property insurers last year, while accident severity continued to plague personal and commercial auto lines.”
“To remain profitable in these challenging times, many insurers are looking for new ways to reduce expenses, increase efficiencies, and enhance the customer experience. And they’re finding help from an ecosystem of advanced technology and analytics that is growing every day.”
For the fourth quarter of last year, Verisk and APCIA report that the US P&C industry’s net income fell to $10.3 billion from $19.8 billion in fourth-quarter 2021, and the annualized rate of return on average surplus fell to 4.4% from 7.9% a year prior.
Meanwhile, net written premiums rose $13.8 billion in fourth-quarter 2022, or 8.2%, compared to a year earlier, while net underwriting losses declined to $5.5 billion from $1.8 billion in gains a year earlier, and the combined ratio deteriorated to 104.0% from 100.0%.
