Economic Recovery Fuels P&C Insurers' Strong First Half

US property and casualty (P&C) insurers experienced strong net income growth during the first half of 2021 as the country's economy continued to recover from the COVID-19 pandemic, according to a report from data analytics provider Verisk and the American Property Casualty Insurance Association (APCIA).

Insurers' net income rose to $37.5 billion during the first half of this year, up from $24.3 billion during the same period in 2020. Meanwhile, the industry's combined ratio improved to 96.7 percent from 97.5 percent during the first half of 2020.

As the US economy improved, P&C insurers wrote $348.4 billion in net premiums during the first half of this year, $24.4 billion more than during last year's first half. Renewal pricing for standard commercial lines—general liability, commercial auto, and commercial property—rose 6.7 percent during the first half of 2021, compared to 7.0 percent in 2020 and 5.1 percent in 2019, according to Verisk.

This year's second quarter played a large part in US P&C insurers' overall first-half performance. Insurers posted $17.5 billion in net income for the second quarter of 2021, according to Verisk and the APCIA, a great improvement from the $6.4 billion during 2020's second quarter.

Increased economic activity also might have led to more claims, Verisk and the APCIA reported. Insurers' incurred losses and loss adjustment expenses (LLAE) increased 6.9 percent during the first half of this year to $229 billion, significantly greater than the 0.8 percent increase during the first 6 months of 2020.

"Net written premiums increased 7.5 percent in the first half of 2021 (10.3 percent in Q2) as insurers experienced similar increases in losses and loss adjustment expenses (LLAE) from ongoing record wildfires, floods and freezes, a spike in ransomware attacks, worsening inflation, and spiraling litigation costs," Robert Gordon, APCIA senior vice president, policy, research, and international, said in a statement.

"While insurers benefited from a positive swing in net realized capital gains, the industry faces ongoing headwinds from climate change, significant deterioration in auto claims severity, growing cyber liability exposure, and emerging losses from the impacts of long-haul COVID," Mr. Gordon said. "As the pandemic appears to unwind, the industry has been bolstering its balance sheet to protect consumers against increasing natural and man-made catastrophic exposures."