Pandemic's Impact, Catastrophes Made for Turbulent 2020 for Insurers

Property-casualty insurers experienced a turbulent year in 2020 marked by the global COVID-19 pandemic that disrupted economic activity and a historic catastrophe season that caused nearly $62 billion in insured losses, according to a report from Verisk and the American Property Casualty Insurance Association (APCIA).

Private US property-casualty insurers' net income after taxes fell 2.9 percent to $60.1 billion in 2020 from $61.9 billion in 2019, Verisk and the APCIA said. Meanwhile, insurers' rate of return on average policyholders' surplus, a measure of overall profitability, declined to 6.8 percent last year from 7.8 percent a year earlier. Insurers also reported a 5.6 percent decline in net investment income and provided approximately $11.5 billion in premium relief to policyholders.

Insurers' combined ratio did improve to 98.7 percent in 2020 from 98.9 percent in 2019, and their net underwriting gain increased to $5.1 billion last year from $3.7 billion in 2019.

"Insurers' net income and net written premium growth declined in 2020 as the industry was hit by the pandemic and severe natural catastrophe losses," Robert Gordon, APCIA senior vice president, policy, research, and international, said in a statement. "Investment yields fell to the lowest level since at least 1960. Insurers eked out a $5.1 billion underwriting gain on more than $650 billion of NWP after reserve releases, although that gain may not reflect the potential of significant long-tail losses from COVID-19."

As economic activity slowed due to the COVID-19 pandemic, premium growth slowed. Property-casualty insurers wrote $650.4 billion in net premiums in 2020, according to Verisk and the APCIA, an increase of 2.6 percent from 2019, in contrast to the 6.2 percent growth rate they experienced during the first quarter before the pandemic took hold.

With 19 catastrophes with at least $1 billion in direct insured losses in the United States during 2020, the property-casualty industry saw a total of $61.7 billion in net insured losses and loss adjustment expenses from catastrophes, more than double the amount in 2019.