Rating Agency Sees US Property-Casualty Performance Improving in 2023
January 05, 2023
US property-casualty insurers should see their operating performance stabilize or improve modestly in 2023, according to Fitch Ratings.
The rating agency said the improved performance will result from commercial and personal lines price increases, a reversion to historical average catastrophe losses, and higher investment yields. "That said, we expect inflation and economic volatility to contribute to higher loss cost uncertainty," a Fitch statement said.
Fitch noted that US property-casualty insurers' statutory financial performance weakened during the first 9 months of 2022 as a result of a sharp deterioration in personal auto results, higher catastrophe losses—particularly from Hurricane Ian, and poorer investment performance.
The US property-casualty industry's underwriting combined ratio rose to 102.3 percent over the first 3 quarters of 2022, corresponding with a $22 billion underwriting loss for the period, Fitch said. Over the same period in 2021, the US property-casualty industry's underwriting combined ratio was 99.6 percent.
Industry net earnings decreased by 19 percent during the period from the first 9 months of 2021 to $35 billion, as higher investment income was outpaced by increased underwriting losses and reduced realized investment gains, according to the rating agency.
Premium growth remained robust with direct written premiums increasing 8.0 percent and net written premiums increasing 7.4 percent, Fitch said. Commercial lines insurers saw an 11 percent increase in direct written premium year over year, while personal lines premiums increased 5 percent.
The commercial lines sector's loss ratio remained relatively constant year over year with a 58 percent direct loss ratio, according to Fitch. "Commercial lines are positioned to maintain favorable underwriting results through 2023, but results could face pressure from growing loss cost uncertainty due to inflation and other economic volatility, particularly in longer tail business lines," Fitch said.
January 05, 2023