While premiums grew for the U.S. P&C insurance sector in the first half the year, carriers continued to report significant underwriting losses, and the segment will be “hard pressed” to match the 102.8% combined ratio posted in full-year 2022, according to Fitch Ratings.
According to the ratings agency, results are anticipated to improve in H2 2023 as pricing increases continue to take hold, but there is still uncertainty around future catastrophe losses, the effects of inflation on loss costs, and also loss reserve experience.
As a result, Fitch’s current sector outlook on the segment is neutral, with results expected to be stable to improving.
Contributing to the improvement will be the gradually emerging recovery in personal auto business, continued stability in commercial lines underwriting, and investment income growth on the back of higher interest rates.
Although Fitch projects a better experience in the second half of the year, higher retentions enforced by reinsurers during 2023 renewals suggests that if there’s activity from so-called secondary perils, it could be another challenging period for U.S. P&C insurers.
In H1 2023, the elevated loss experience, which was dominated by severe convective storms, pushed the segment’s combined ratio up to 104.4% from 100% in H1 2022.
While underwriting performance has suffered, Fitch notes that the industry’s written premium growth remains “highly positive” with direct written premiums increasing 8.6% and net written premiums by 8% year over year.
There were steep increases in auto and homeowners premium rates in many jurisdictions leading to personal lines DWP increasing by 11% for the period, and commercial lines DWP growth of 6%.
