Pricing, better investment yields could improve P&C performance in 2023
The coming year should see some stabilization in the personal auto space, but car insurers might not break even until 2024, Fitch Ratings reports.
In 2023, pricing increases in personal and commercial lines, higher investment yields and a return to catastrophe-loss levels more in line with historical averages should lead to “stabilizing to modestly better” operating performance for U.S. property & casualty insurers, Fitch Ratings reported.
The agency does anticipate a continuation of inflation and economic volatility to result in higher loss cost uncertainty.
Through the first nine months of 2022, the U.S. P&C sectors saw financial performance weaken because personal auto results deteriorated, Hurricane Ian drove up catastrophe losses and insurers’ investments did poorly, Fitch Ratings reported. During the period, which had a $22 billion underwriting loss, the industry’s combined ratio reached 102.3%.
Additionally, the first three quarters of 2022 saw P&C industry net earnings fall 19% compared with the same period the year prior, according to the ratings agency, which noted higher investment income was weighed down by bigger underwriting losses and “reduced realized investment gains.”
Personal auto stabilizes
Although 2022 saw personal auto insurance companies get hammered by inflation, supply chain issues and skyrocketing auto values, the coming year is expected to see the sector stabilize. Fitch Ratings reported that through the first nine months of 2022, the personal auto loss ratio increased 12 points year on year to reach 77%.
During the coming year, auto insurance carriers will take corrective pricing and underwriting actions, but these improvements might not result in a break-even point until 2024, according to the ratings agency.
While personal lines have a tough row to hoe, Fitch anticipates commercial lines to maintain favorable underwriting results through 2023. Through the first nine months of 2022, the commercial lines sector’s loss ratio stood at 58%, relatively unchanged from the year prior. In comparison, personal lines saw a loss ratio of 78% through the first nine months of 2022.
Commercial lines of business that delivered particularly strong results included workers’ comp, other liability — claim made, and commercial multi-peril.
In the coming year, inflation and economic volatility could pressure loss costs uncertainty for commercial lines, Fitch Ratings reported, particularly for longer tail lines.
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