According to a new AM Best report, despite witnessing a growth of more than 9% in both direct (DPW) and net premiums (NPW), US property & casualty (P&C) insurers still incurred an $3 billion underwriting loss in 2021.
The underwriting loss was largely attributable to a 12.6% increase in net incurred losses, with private passenger auto experiencing an increase of 24% and commercial auto with 11%, both in incurred losses.
The report – Property/Casualty Snapshot: Insurers Navigate Pandemic and Elevated Secondary Perils, noted that underwriting loss in 2021 followed a $4.4 billion underwriting gain in 2020.
Moreover, various factors specific to the auto, medical professional liability, and general (other) liability (occurrence and claims-made) lines of business continue to pose notable challenges to underwriters.
AM Best also noted that loss severity in the private passenger and commercial auto segments show no signs of abating, with personal auto writers suffering their second-worst underwriting results in five years.
However, even though the medical professional liability line improved its underwriting results, the report shows that the segment still posted an $834 million loss on an 8% increase in incurred losses.
Loss costs continue to plague the general liability lines, though years of rate increases have enabled carriers to grow top line premium.
Furthermore, despite the losses within certain lines, AM Best noted that growth in both DPW and DPE helped generate 15% increase in direct underwriting profits.
“Property/casualty insurers’ enterprise risk management skills have been put to the test the last couple of years,” said David Blades, associate director, industry research and analytics.
“Property underwriters are facing primary and secondary peril catastrophe risks that have reverberated throughout the reinsurance market, further pressuring underwriters of homeowners/farmowners coverage and of commercial property.”
Christopher Graham, senior industry analyst, AM Best, added: “Across the industry, claims costs, social inflation and nuclear verdicts continue to pressure results. Other issues such as social unrest, cyber attacks and extreme climate-related events have made setting year-end reserves more challenging.
“Together with economic inflation and the possibility of a recession, many P/C insurers’ bottom-line profitability could suffer in 2022.”
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