US commercial auto crashing on ever-older accident year losses

US commercial auto insurance is dogged by its liability component, with heavy adverse reserve development on relatively old vintages suggesting that the pain won't end soon, analysts at AM Best have warned.

Commercial auto results deteriorated notably in 2022 with more than half of the calendar year underwriting loss attributable to adverse loss development on older accident years, AM Best noted.

Adverse development in 2022 bounced back from a prior-year quiet spell to $2.1 billion.

The liability-side loss ratio in US commercial auto rose to 72.7%, up from 68.7% in the prior year period and a four-year running average of 67%.

“Even more concerning is how far back the development is occurring,” analysts warn.

Over half the adverse development noted in 2022 was counted against the 2018 and 2019 accident years.

While pandemic court closures in the interim might naturally boost adverse development for those years in the latest accounting, analysts can only suspect that the backlog of adverse development has a long journey through the bottleneck. Catch-up on 2020 and beyond might yet lie in wait.

“More development may be on the way,” analysts conclude. Regardless, “total development on these accident years is still more than expected.”

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