A new report from AM Best has shown that weather-related losses persisted for the US property & casualty (P/C) insurance segment in 2022, which ultimately pressured financial results in a year that also witnessed a 40-year high for inflation, and the second costliest catastrophe event on record.
According to the report, trends within personal auto space provided the biggest drag on the overall US P&C segment’s results, despite auto insurers’ best efforts to contend with rising severity, supply chain issues and increased medical costs.
Best noted that pricing momentum achieved by P&C firms in 2021 carried into 2022, however personal auto and homeowners’ results as well as the volatility that weakened the economy, contributed to an estimated four-point yoy deterioration in the overall segment’s reported combined ratio, from 100.0 to 104.0.
In addition, the personal segment witnessed an estimated $34.9 billion underwriting loss for 2022, which nearly tripled the prior year level, and also drove a five year high underwriting loss for the overall industry.
Best states that the deterioration in the personal auto line was primarily responsible for the much larger underwriting loss in 2022, which was reflected in the rise within the segment’s combined ratio to 108.2 from 102.7 in 2021.
However, on more positive terms, the P&C industry’s estimated net investment income grew a substantial $16.9 billion, to an estimated $73 billion.
Best added, that this result was majorly impacted by a $10.8 billion intercompany distribution at one very large reinsurer during the year. At the same time, substantial unrealized losses, estimated at $111 billion, were the primary driver for the 9.4% decline in the P&C segment’s policyholders’ surplus at year-end 2022.
AM Best Managing Director John Andre, said: “Despite the unrealized losses and healthy 8.8% growth in net premiums written, the ratio of net writings to surplus is estimated to have increased slightly to 0.8 at year-end 2022, indicating the industry’s solid capital position.”
The report also noted that weather-related losses persisted in 2022, with estimates of US cat-insured losses in excess of $90 billion, which includes hurricane Ian, which generated an estimated $50 billion – $65 billion in losses. Hurricane Ian was the largest catastrophe event of 2022, and the second-costliest event ever, following 2005’s hurricane Katrina.
Lastly, Best also highlighted how pricing for most commercial lines of coverage continued to trend favourably in 2022, as the need to combat inflation remains a key influence on industry premium trends.