In 2022, the U.S. property/casualty (P/C) industry experienced a significant setback as it reported a staggering $25.7 billion net underwriting loss, according to a recently released AM Best report.
The main reason behind this downturn was the substantial deterioration in the underwriting results of the personal lines segment, particularly in the private passenger auto line of business, the report noted.
The report, titled “2022 P/C Snapshot: Unprofitable Auto and Property Results Weaken P/C Underwriting Performance,” highlighted that the personal lines segment bore the brunt of the underwriting loss, amounting to a staggering $40 billion.
The losses in the personal auto line of business, which accounted for over 80% of the personal lines loss, were nearly eight times higher compared to the previous year. Additionally, the homeowners/farmowners line experienced a net underwriting loss for the third consecutive year.
“P/C claims expenses were magnified by inflationary pressures on the costs of repairing property and automobiles, as well as by lingering supply chain issues,” David Blades, the associate director of Industry Research and Analytics at AM Best, explained.
Lingering supply chain issues further complicated matters, challenging insurance companies’ reserving practices and adversely affecting their operational performance, Blades added.
On a brighter note, the commercial lines segment managed to generate positive underwriting results in 2022. Despite some volatility, this segment has posted profitable results in four out of the past five years. The segment’s $14.7 billion underwriting gain in 2022 was driven by the strong performance of workers’ compensation, other liability (claims-made), and surety coverage.
Christopher Graham, the senior industry analyst of Industry Research and Analytics at AM Best, noted that while the commercial lines segment displayed a better outlook, it still faced challenges.
Social and medical inflation contributed to higher loss costs, and the number of claims increased for virtually all casualty lines, particularly those involving claimant-attorney representation, with juries awarding plaintiffs large settlements. Medical costs were also expected to escalate due to advances in medical technology and treatments, Graham noted.
