US P&C to post second consecutive underwriting loss in 2017
The US property/casualty (P&C) industry is set to post a second consecutive underwriting loss in 2017, driven mainly by catastrophe losses, according to AM Best estimates.
The industry 2017 combined ratio is expected to deteriorate to 105.1 percent in 2017 from 100.9 percent in the previous year.
Hurricanes and wildfires caused extensive insured losses in the third and fourth quarters. Competitive pricing conditions were entrenched in most commercial lines, although by year-end, there was widespread recognition of the need for price increases in key P&C lines.
The personal lines segment was impacted not only by the catastrophe losses, but also by higher losses for auto liability (much of which were related to adverse development of prior accident years’ loss reserves) and rising costs for vehicle repairs that negatively affected physical damage losses.
Although the industry’s 2017 reported results are expected to show an increase in favourable development of loss reserves, if prior years’ reserve changes are adjusted for two unusual 2016 events (a substantial increase in prior years’ reserves by AIG and a reinsurance contract at Allianz that drove a one-time reduction in prior years’ reserves), favorable development would have declined. Favourable development for 2018 is likely to decline, but continue to provide a modest boost to the industry’s overall results, according to the agency.
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