Insurance carriers review strategies in an evolving market
An accelerating rate of change in the P&C insurance market has become a constant, according to Guy Carpenter.
The environment in which insurers operate today is significantly different than just a few short years ago, according to an annual review of property & casualty (P&C) results conducted by Guy Carpenter & Company LLC, a global risk and reinsurance specialist and a wholly owned subsidiary of Marsh & McLennan Companies.
The biggest push on the loss ratio increase has been the recent re-emergence of significant catastrophe losses, with 2017 being the largest year for North American CAT activity on a trended basis since Hurricanes Katrina, Rita and Wilma in 2005.
Related: Devastating storms seen spurring action on disaster preparation
Breaking down market lines
Rate actions varied by line of business and region but generally began to trend favorably through 2017 and the first half of 2018, driven by significant rate gains in commercial and personal auto lines and some increases in loss-affected property markets, according to Guy Carpenter’s recent “Risk Benchmarks Research 2018″ report.
- Across most major commercial casualty lines, correlations on an initial and ultimate booked basis dropped significantly over the past several years from near-perfect dependence in some cases to near independence or negative correlation, as line-specific claims and exposure trends trumped cyclical market conditions.
- Commercial auto liability carriers experienced consistently elevated loss ratios over the past seven years despite cumulative rate increases over 30% in that period. Fewer than 20% of commercial auto liability writers made an underwriting profit during any accident year in that period.
- Personal auto carriers experienced unfavorable trends similar to those of commercial auto writers, albeit to a slightly lesser extent. Even with improvements in pricing, only 20% of personal auto carriers made a positive net underwriting return in 2017 — an improvement from the 8 to 12% seen in 2015 and 2016.
- Workers’ compensation, one of the best-performing lines in recent years, saw initially expected loss ratios tick up 2 to 3% from those of 2016 as carriers digested rate decreases. Even as rates decreased, 60 to 70% of carriers in this line have achieved an underwriting profit since 2013.
“The accelerating rate of change has been a constant in the P&C insurance market over the past several years,” Tim Gardner, CEO, North America at Guy Carpenter, said in a press release. “The recent performance of the P&C industry seems a departure from the long-term trend, rather than the familiar regression towards it.”
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