US P&C industry suffered $4bn+ underwriting loss in 2021 on claims surge

The US property and casualty (P&C) insurance industry suffered a $4.1 billion net underwriting loss in 2021 as solid premium growth proved no match for runaway claims and related costs, ratings agency  AM Best said in a new report.

Net written premiums rose by 9.2% or $58 billion to $690.7 billion.

Commercial multiple peril rose at a slower 6.9% pace; commercial auto at a much faster 18.3% pace. Workers’ comp posted the sixth low3est rate of growth amongst 33 listed segments at 0.8%.  Excess workers comp contracted.

The largest personal lines grew at mid-single-digit rates, led by 7.5% growth in net written premium for homeowners’ multi-peril and 5.6% growth for auto physical damage ahead of 3.1% growth for auto liability.

That growth paled next to the hefty 13.6% increase in incurred losses (or 11.7% when combined with loss adjustment expense) and a 5.4% increase in underwriting expenses.

That rise in claims pushed the pure loss ratio for the industry up 3.4 percentage points to 62.6%, the driving force behind a 1.3 percentage point rise in the combined ratio to 99.6%. For the accident year, mark the combine ratio up a point to 100.5%.

"We estimate that catastrophe losses accounted for 7.7 points on the 2021 combined ratio, down from an estimated 8.0 points in the prior year," authors wrote.

An 8.5% or $4 billion increase in net investment income plus a rise in net realised capital helped push the industry to a rise in net profits against the prior year.

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