US personal lines still behind the rate curve; profit distant: AM Best
US personal lines insurers have yet to get a leg up on rate approvals, making a return to underwriting profit over the near term “highly unlikely,” a top analyst at the AM Best rating agency told a webinar to justify his agency’s negative outlook on the segment.
“A return to underwriting profitability for this segment over the near term appears highly unlikely,” Joseph Burtone, AM Best director for P&C, personal lines, told the online audience.
Reported results have shown “continued deterioration” following a spike in loss costs and the hike in reinsurance costs that left carriers with reduced earnings protection. Attempts to push through rate have not kept pace.
“Efforts to address rate adequacy are neither simple to execute nor accomplish,” Burtone said. Despite word of notable rate hikes in “several” jurisdiction across the US, “the ability to stay ahead of current trends has been challenging.”
In auto, severity in auto is up on fatality rates, repair costs, used vehicle prices, supply chain and labour market disruptions and rising medical costs. Frequency returned to pre-pandemic levels. “Insurers have pursued rate increases, but the timeliness and effectiveness has varied,” Burtone said.
The shape of ant cat events, heavily focused on secondary perils in 2023 as an extension of recent trends, lined up poorly against the 2023 reinsurance market reset that saw retention levels increase and aggregate programs shrink or disappear altogether.
“In some cases, this has severely impacted results, particularly for those carriers with geographic or product concentration,” Burtone said. “Reinsurance pricing will remain a headwind for the personal lines segment.”
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