U.S. P&C Industry Sees $32.2B Underwriting Loss in First Nine Months Of 2023

Posted February 15, 2024

The U.S. property and casualty (P&C) industry posted a $32.2 billion net underwriting loss for the first nine months of 2023, a $7.6 billion slide from the same period in 2022, according to a “first look” report from AM Best.

Losses in the personal lines sector, specifically homeowners insurance, drove the industry’s poor results, AM Best noted. Despite a growth of 9.7% in net earned premiums, the P&C industry reported a 103.4% combined ratio for the first nine months of the year.

Running counter to the boost in premiums was an 11.9% increase in incurred losses and loss adjustment expenses, along with a 7.3% rise in other underwriting expenses.

Catastrophe losses added about 9.8 percentage points to the combined ratio, up from 7.3 points in 2022. The industry surplus dropped slightly to $980 billion.

While homeowners contributed the bulk of the nine-month underwriting losses, AM Best highlighted the worsening state of the personal auto market in a separate report. The line’s 112.2 combined ratio in 2022 marked an 11-percentage point drop from 2021 and a 10-point worsening from the 10-year average for personal auto. Personal auto posted a $33.1 billion underwriting loss last year, and the average claim cost jumped 16%.

In the first half of 2023, personal auto insurers recorded a 75.6% loss ratio – 3.6 higher than the first half of 2022. This rise in losses comes even as auto insurers have taken in a 12.9% year-over-year increase in direct premiums written during the first six months of this year.

“Workplace patterns have changed post-pandemic with work-from-home arrangements, reducing the number of vehicles on the road. However, driver inattentiveness and riskier driving habits have become more problematic in the last few years. As a result, auto severity has worsened,” said Christopher Graham, senior industry analyst of industry research and analytics at AM Best.

However, higher premium levels may ultimately provide some benefit on the expense ratio side for insurers, AM Best noted. The ratings firm cited technological improvements by carriers in claims handling processes and expense management that should provide a boost.

“Even with overall industry results deteriorating, carriers that are ahead of the curve in terms of rate adequacy, pricing sophistication, and technology adoption to augment claims handling will likely have some built-in competitive advantages,” said AM Best. “Conversely, companies lacking such competitive advantages will find it even more difficult to effectively deal with the inflationary environment while seeking to generate improved results.”