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3 October 2022 Insurance

‘Breakout year’ for US P&C fails to materialise: Fitch

Expectations that 2022 could be a “breakout year” for US P&C market results, following a couple of challenging years, have not materialised due to continued weakness in personal auto.

Pending large reported losses from Hurricane Ian will add to underwriting losses. However, continued commercial lines pricing momentum and potential for higher investment portfolio yields provide hope for better profits in 2023.

This was the view of Jim Auden (pictured), managing director, North America insurance, at Fitch Ratings, when he spoke to Intelligent Insurer just ahead of this year’s meeting in Dallas, Texas.

Fitch’s current market sector outlook for US P&C is neutral, despite plenty of challenges with the COVID-19 pandemic, natural catastrophes and rising litigation costs.

“Results have been very steady over the last four years or so with industry combined ratios of 99 to 100 percent, statutory earnings in the $60 billion range every year and a tremendous increase in industry surplus from 2018 to 2021, with earnings and growth in investment performance,” Auden said as he pointed to an industry surplus of more than $1 trillion at year end 2021.

“For 2022, we thought that it could be a breakout year where results would be better than a 99 to 100 percent combined, but it’s not looking that way currently,” he added.

Premium growth remains very favourable, according to Auden, who said that last year it was around 10 percent, while this year it could be more like 7 to 8 percent. The combined ratio at mid-year was still around 100 percent for the market, which Auden said “reflects a sharper divergence between commercial lines and personal lines results”.

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