20 January 2017 Insurance

US P&C insurers accrue $1.7bn underwriting loss in 2016 9M

Private US property/casualty insurers suffered a $1.7 billion net underwriting loss in the first nine months of 2016-following a $7.3 billion net underwriting gain in nine-months 2015, according to ISO, a Verisk Analytics business, and the Property Casualty Insurers Association of America (PCI).

The sector also experienced a drop in net income after taxes to $31.8 billion from $44.1 billion a year earlier.

Robert Gordon, PCI's Senior Vice President for Policy Development and Research, said: "Profitability has been sluggish; and premium growth, underwriting gains, pre-tax operating and net income, and combined ratios have all worsened.

“According to industry statistics that we're monitoring, some of the poor performance is a result of increasing loss ratios in the auto lines, which were affected by rising accident frequency and severity. The combined ratio for personal lines insurers deteriorated to 102.9 percent, with significant increases in personal auto loss ratios. Commercial auto loss ratios also increased.

“As we move forward, it's important for all the stakeholders-including consumers, insurers, and policymakers-to take significant steps to reduce the growth of auto losses."

Insurers' combined ratio deteriorated to 99.5 percent in nine-months 2016 from 96.9 percent in nine-months 2015, and net written premium growth slowed to 2.8 percent in nine-months 2016 from 4.1 percent a year earlier.

Net investment income in private US property/casualty insurance dropped to $33.0 billion in nine-months 2016 from $34.9 billion a year earlier, and realised capital gains decreased to $5.6 billion from $8.8 billion, resulting in $38.6 billion in net investment gains for nine-months 2016, down $5.1 billion from a year earlier.

Beth Fitzgerald, president of ISO Solutions: "The industry's results continued to decline in the first nine months of 2016. Higher catastrophe losses and less favourable reserve development pushed the combined ratio above 99 percent and resulted in a net underwriting loss for the second quarter in a row."

Direct insured property losses from catastrophes striking the United States totalled $17.4 billion in nine-months 2016, up from $13.1 billion a year earlier and above the $15.9 billion average nine-months direct catastrophe losses for the past ten years.

"At the same time, there are some promising signs in the industry. Policyholders' surplus continued to grow and reached a record high of $688.3 billion. The Federal Reserve raised interest rates in December 2016 and is expected to increase rates further in 2017. Still, it will take time for insurers' investment yields to improve. To succeed in today's market, insurers need to be focused on their underwriting. Those that incorporate robust data and analytics will be equipped to make the best possible decisions about the risks they insure," Fitzgerald noted.

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