Property & casualty insurers in the US had a particularly challenging year in 2022, according to a report from Verisk and the American Property Casualty Insurance Association (APCIA), as the industry saw a net underwriting loss of $26.9 billion.
This marks the largest underwriting loss experienced by the industry since 2011 and is six times higher than the $3.8 billion loss reported in 2021.
Net income also took a hit and dropped to $41.2 billion in 2022, representing a 33.6% decline from the previous year's figure of $62.1 billion.
Additionally, incurred losses and loss adjustment expenses grew by 14.1% in 2022, while earned premiums grew by 8.3%. The combined ratio, a key measure of profitability for insurers, deteriorated to 102.7% in 2022, from 99.6% in 2021.
Robert Gordon, senior vice president, policy, research & international for APCIA, pointed to increasing input costs, natural catastrophes, legal system abuse, and resistance in some states to adequate rates as the driving forces behind these losses.
“In 2023, insurers are faced with a significant challenge to close the rate gap in order to meet their growing cost of capital,” Gordon said.
Neil Spector, president of underwriting solutions at Verisk, also acknowledged the impact of Hurricane Ian and inflation on property insurers and remarked on how accident severity had “plagued” personal and commercial auto lines.
“To remain profitable in these challenging times, many insurers are looking for new ways to reduce expenses, increase efficiencies, and enhance the customer experience,” Spector said. “And they’re finding help from an ecosystem of advanced technology and analytics that is growing every day.”
Despite a recovery in policyholders’ surplus, which rose to $952.4 billion from Q3 2022’s $911.7 billion, insurers’ rate of return on average policyholders' surplus fell to 4.2% from 6.4% in 2021, according to the report.
In Q4 2022, net written premiums rose by 8.2% year-on-year, while net underwriting losses declined to $5.5 billion from $1.8 billion in gains a year earlier. Net written premiums increased by 8.2% to $13.8 billion compared to the same period in the previous year.
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