Combined ratio for P&C this year ‘to worsen to 100.7’

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The 2022 combined ratio for the property/casualty insurance industry is forecast to be 100.7, a worsening of 1.2 points relative to 2021, driven by significant deterioration in the personal auto line.

This is according to the latest underwriting projections by actuaries at the Triple-I and Milliman, who said that loss pressures and a hard P&C market are expected to continue due to inflation, supply chain disruptions, and geopolitical risk. They presented their projections in a quarterly report called the Insurance Information Institute (Triple-I) /Milliman Insurance Economics and Underwriting Projections: A Forward View.

Michel Léonard, chief economist and data scientist at Triple-I, said that insurance growth continues to be constrained by economic fundamentals, with replacement cost increases at multiples of pre-COVID levels and subpar underlying growth.

He added: “P&C underlying growth of 0.35%, while more resilient than the economy’s -0.93%, are both down year-over-year and year to date. We would like to see at least another quarter of improvements before fully factoring their impact into homeowners, commercial property, and auto insurance replacement costs.”

Dale Porfilio, chief insurance officer at Triple-I, discussed the overall P&C industry underwriting projections.

He said: “We forecast 2022 premium growth of 8.5%, lower than the 9.2% growth in 2021, but still strong due to the economic recovery and a hard market.

He added that while 2022 catastrophe losses were lower in the first half than in 2020-2021, they were higher than 2018-2019. On personal auto, Porfilio said that the 2022 net combined ratio is forecast to be 105.2, 3.8 points higher than 2021, driven primarily by significant deterioration in auto physical damage coverages.

He added: “For personal auto in total, quarterly direct loss ratios deteriorated rapidly from the pandemic low of 47.5% for Q2 2020 to an average of 72.8% for the most recent three quarters of Q3 2021 to Q1 2022. Recent deterioration has been driven by physical damage coverages, with an average direct loss ratio of 78.6% in the most recent three quarters being the worst in two decades.”

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