Favourable first-quarter economic and underwriting results for property & casualty (P&C) insurance are reportedly in line with projections that the sector will see a small underwriting loss in 2024, but achieve profitability in 2025, according to a new forecasting report from Insurance Information Institute (Triple-I) and Milliman, a collaborating partner.
The report also notes that homeowners insurance underwriting losses are expected to continue for 2024-2025.
However, is is anticipated that the line will become profitable in 2026, with continued double-digit net written premium growth for 2024-2025.
As well as this, personal auto net combined ratio saw a slight improvement from prior estimates and is now said to be on track to achieve profitability in 2025.
At the same time, commercial lines 2024 net combined ratio remained unchanged despite shifts in commercial property (-1 point), workers’ compensation (-1 point), and general liability (+1 point).
Furthermore, net written premium growth rate for personal lines is expected to continue to surpass commercial lines by over 8 percentage points in 2024.
Dale Porfilio, FCAS, MAAA, Triple-I’s chief insurance officer, commented: “The ongoing performance gap between personal and commercial lines remains, but that gap is closing. This quarter, we are projecting commercial lines underwriting results to outperform personal lines premium growth by over five points in 2024. The difference in large part illustrates how regulatory scrutiny on personal lines has curbed the ability for insurers to increase prices to reflect the significant amount of inflation that impacted replacement costs through and coming out of COVID.”
Jason B. Kurtz, FCAS, MAAA, a principal and consulting actuary at Milliman, noted how commercial multi-peril is one line that continues to face “long-term challenges.”
He said: “While the expected net combined ratio of 106.2 is one point better than 2023, matching the eight-year average, the line has not been profitable since 2015. And with a Q1 direct incurred loss ratio of 52% and premium growth rates continuing to slow, we see some improvement but continuing unprofitability through 2026.”
Moreover, Kurtz also highlighted the continuing sturdy performance of workers’ compensation.
He said: “The expected 90.3 net combined ratio is nearly a one-point improvement from prior estimates and would mark 10 consecutive years of profitability for workers’ comp. We continue to forecast favorable underwriting results through 2026.”
Donna Glenn, FCAS, MAAA, chief actuary at the National Council on Compensation Insurance (NCCI), added: “Medical costs are going up, but they have not experienced the same type of inflation as the broader economy. Since 2015, both workers’ compensation severity and medical inflation, as measured by NCCI’s Workers’ Compensation Weighted Medical Price index, have grown at a similar rate, a quite moderate 2% per year.”
Michel Léonard, Ph.D., CBE, chief economist and data scientist at Triple-I, noted: “For the last 12 months, economic drivers of insurance performance have been favorable to the industry, with P/C insurance’s underlying growth catching up to overall U.S. economic growth rates, and its replacement costs increasing at a sluggish pace compared to overall inflation. We expected this favorable window to last into 2025.”
However, this may not be the case anymore for two key reasons, Léonard explains.
“First, U.S. economic growth slowed more than expected in Q1 2024, largely because of the Fed’s lack of clarity about the timing of interest rate cuts.
“Second, global supply chains are again showing stress due to ongoing and increasing geopolitical risk, such as the tensions in and around the Suez Canal. These causes may be threatening to send inflation back toward pandemic-era levels. Geopolitical risk never left and supply chains are on a lifeline,” he concluded.
The post P&C premium growth showing some promise, may see profitability in 2025: Triple-I/Milliman appeared first on ReinsuranceNe.ws.
