P&C industry combined ratio could surpass 100% in 2022
According to an S&P report, inflation could send the P&C industry to its first unprofitable year from an underwriting standpoint since 2017.
At the end of 2022, the insurance industry could post a calendar-year combined ratio of 100.4%, says a recent market report from S&P Global Market Intelligence. This would make it the P&C industry’s first unprofitable year from an underwriting standpoint since 2017. While some P&C business lines in the U.S. have seen continued favorable conditions, the report notes, that has been largely offset by the inflationary pressure on other lines.
One line that has been particularly influenced by inflation is private auto. S&P’s report states private auto will account for over 35% of the net P&C premium written in the U.S. in 2022, and it has been hit hard by increases in vehicle prices, as well as interruptions in the automotive supply chain.
Commercial lines, on the other hand, showed strongly in 2021, with a combined ratio of 96.1% — its best showing since 2015. The report predicts a similar result for 2022, with commercial lines projected to end the year with a combined ratio of 96.3%.
Despite the hang-ups with some lines, S&P expects a return to modest profitability – a combined ratio of about 99.7% — in 2023, as long as the industry continues to implement meaningful premium increases in lines that need them. Of course, if inflation remains elevated, private auto claims costs could continue to rise, though S&P predicts high gas prices could prove positive from a claims frequency standpoint, as they may encourage drivers to limit their vehicle usage.