U.S. P&C industry saw $21.2 billion underwriting loss in 2023
Swiss Re is forecasting a much more favorable 2024 for the industry, predicting strong premium growth of 7% for the year.
The United States property and casualty insurance industry recorded an underwriting loss of $21.2 billion in 2023, an improvement from the loss of $24.9 billion in 2022, says a recent report from AM Best. The combined loss ratio for the P&C industry improved by 0.9% from the year prior to 101.6% in 2023.
Underwriting losses were driven by an increase in both the number and severity of climate events. Climate catastrophe losses accounted for about 8.7 points of the combined ratio in 2023 — up from 7.3 in 2022.
The U.S. experienced 28 billion-dollar climate disasters last year with a total cost of over $93 billion. For context, since 1980 the U.S. has averaged 8.4 billion-dollar (CPI-adjusted) weather events per year with damages averaging $59.4 billion. These events have become much more frequent in recent years, averaging 20.4 billion-dollar events for around $121.1 billion in losses each year from 2019 to 2023.
According to the NOAA, as of March 8, there had only been one confirmed weather event with losses exceeding $1 billion in 2024.
AM Best reports that a 9.9% growth in net earned premium in 2023 was countered by a 10% increase in incurred losses and loss adjustment expenses, a 6.4% increase in other underwriting expenses and a 4.5% increase in policyholder dividends, which ultimately resulted in underwriting loss.
In January, Swiss Re forecast a much more favorable 2024, predicting strong premium growth of 7% for the year and 4.5% growth in 2025. Personal lines are expected to be the main driver of growth in the year ahead as economic inflationary pressure eases. Commercial lines — which Swiss Re notes are more influenced by social inflation — are expected to counter strong property growth with weak liability growth.
They expect the industry net combined ratio will be at 98.5% for both 2024 and 2025, led by personal auto. Industry return-on-equity is forecast to be 9.5% in 2024 and 10% in 2025; both significantly higher than the estimated 5% in 2023.