Swiss Re, a global reinsurance company, forecasts a slowdown in US property and casualty (P&C) insurance premium growth, balanced by easing claims pressures as US Consumer Price Index (CPI) inflation is projected to average 2.5% in 2025 and 2.4% in 2026, although profitability for the sector is expected to be stable.
The reinsurer has revised its premium growth estimate to 5% for 2025, citing easing inflation pressures, while 2026 is expected to see a 4% growth rate.
Swiss Re added, “Deceleration in 2H24 is consistent with our expectation of lower growth in 2025 as more insurers chase market share, especially in personal lines. Growth is heavily influenced by the underwriting cycle but supported by exposure growth: we forecast that US real GDP, a broad exposure proxy, will grow by 2.7% in 2024 and 1.9% in 2025.”
Premium growth has continued to decelerate slowly in commercial lines and shrink in workers’ compensation. Liability lines were the fastest-growing business in Q3’24, with commercial auto liability premiums up 11% year on year.
Segment-wise, Swiss Re reports that personal lines saw a rapid improvement in underwriting results in 2024 as claims severity pressures coincided with regulatory rate increase approvals. Personal auto experienced the most significant gains within the segment.
Premiums for personal auto remained strong in Q3 2024 but decelerated by 4 percentage points (ppt) from the prior quarter. A similar trend is forecast for homeowners (excluding catastrophe losses), with construction prices expected to re-accelerate slightly, reaching an estimated 2.5% in 2025 and 3% in 2026.
As of November 1, 2024, 24 weather events in the US caused economic losses of at least $1 billion each, with the insured portion contributing nearly 9 ppt to the US P&C industry’s net loss ratio for the first nine months (9M) of 2024, Swiss Re said.
The industry’s combined ratio for 2025 is projected to remain at 98.5% before slightly deteriorating to 99% by 2026. The 9M 2024 net combined ratio stood at 98.2%, roughly in line with Swiss Re’s 2024 estimate of 98.5%. This performance was partially attributed to more favourable reserve development than expected, amounting to $9 billion, which contributed to a reduction of slightly more than 1 ppt to the loss ratio. Swiss Re notes that this offset slightly higher-than-anticipated catastrophe losses.
Hurricanes Helene and Milton in Q3 and Q4 caused combined estimated insured losses of approximately $50 billion. On a global scale, insured losses from natural catastrophes are on track to exceed $135 billion in 2024, with the US accounting for at least two-thirds of the total. Most severe weather-related losses stemmed from homeowners’ claims; however, the segment’s loss ratio improved by 14 ppt year-on-year in 9M’24, driven by earned rate increases.
Investment income for the US P&C portfolio yields to rise to 4% in 2025 and 4.3% in 2026 as recurring investment income continues upward momentum. The net investment income earned of $57 billion through 9M’23 was more than 20% higher than in 9M’23.
In 2025, Swiss Re anticipates greater earnings stability for the US P&C industry despite elevated uncertainties ranging from fiscal and monetary policy to tariffs and geopolitical risks.
Four consecutive years of approximately 10% premium growth have helped insurers repair underwriting results after a surge in claims costs starting in 2021, bringing industry returns closer to investor targets. As more insurers reach rate adequacy and target higher growth, Swiss Re predicts that industry growth will slow toward longer-term averages, with premiums projected to rise by 5% in 2025 and 4% in 2026.
Return on equity (ROE) is expected to remain around 10% in 2025 and 2026, as slightly higher investment income offsets plateauing and gradually deteriorating underwriting results.
Swiss Re added, “Our outlook for 2025 is for decelerating growth and stable profits, but uncertainties abound. We expect the improvement in underwriting performance to slow.”
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