A new report from Verisk estimates that private US property and casualty insurers saw a $5.6bn underwriting loss in the first nine months of 2021.
The report, authored by Verisk president of underwriting solutions Neil Spector and APCIA’s senior vice president for policy, research, and international Robert Gordon says that the reason for the underwriting loss lies with non-catastrophe losses returning to pre-pandemic levels.
The firms also found that direct losses for personal auto liability increased 14.1% in nine months 2021 and the industry’s combined ratio—a critical measure of insurer profitability—worsened to 99.5%, from 98.8% a year earlier. While non-catastrophic losses were on the rise, insured catastrophe-related losses remained high. Both in 2020 and 2021, estimated nine-months net loss and loss adjustment expenses from catastrophes exceeded $48bn.
It was also posited that overall net written premium growth accelerated to 9.4% in nine months 2021, from 2.9% the year prior, as the economy was on the path for recovery from the massive disruptions caused by COVID-19 in 2020.
In a written statement, Spector said: ““While catastrophes, including hurricane Ida in September 2021, brought major insured losses, it was an increase in non-catastrophic losses, especially in personal auto, that contributed the most to the worsening of underwriting results in 2021.”
He added: “As the economy continued to recover, insurers saw incurred losses return to more typical levels, additionally pushed up by inflation and supply chain issues. Going into 2022, the insurance industry continues to face a wide range of challenges, from climate change to evolving cyber threats. Those insurers with access to robust data from across the industry will be the best equipped for the constantly changing risk landscape.”
The report also states that in Q3 2021, insurers saw their net income after taxes decline to $4.7bn from $10.9bn the year prior. The industry’s operating income was $2.5bn, down from $7.7bn in third quarter 2020.
It also found that loss and loss adjustment expenses increased in the same period to $143.1bn from $121.4bn a year earlier. These helped drive the loss ratio for the quarter to 79.3%, the highest quarterly loss ratio since third-quarter 2017, when Hurricanes Harvey, Irma and Maria caused extensive losses.
Meanwhile, combined ratio deteriorated to 104.5% in third quarter 2021 from 101.3% in third quarter 2020.
