U.S. insurance industry sees beginnings of surplus recovery
Early 2024 was characterized by an uptick in non-traditional CAT activity, including numerous convective storms.
Insurance industry gains for the first half of 2024 are estimated at $95 billion, according to a report from Verisk and the American Property Casualty Insurance Association (APCIA). When adjusted for the $50 billion-plus realized by one insurer, that leaves H1 gains for the industry at large at around $45 billion.
When adjusted for inflation, industry surplus has not recovered to the levels seen in early 2022, but despite losses similar to those in 2023, 2024’s losses thus far are not reducing the surplus as they did in the past few years.
According to the report, insurers wrote $463 billion in premiums in the first half of 2024 – an increase over the $420 billion collected at that point in 2023. Earned premiums grew by 11% to $436 billion to start 2024.
“Insurers’ surplus is continuing to recover from the catastrophic losses in 2022, although it has not kept pace with inflation or the economic demands for insurance coverage,” Robert Gordon, senior vice president of policy, research, and international at APCIA, said in a release. “Commercial lines have been profitable and are restabilizing, while personal lines have improved but are still struggling to keep up with rising losses. With an expected spike in hurricane season activity in the forecast and the remaining months of wildfire season still ahead, it remains to be seen if insurers can finish the year with an underwriting profit after two straight years of underwriting losses.”
There was a significant improvement in underwriting in the first half of the year, with a $3.7 billion gain reported, compared to losses of $23.4 billion in the first half of 2023 and $5.6 billion in the first half of 2022.
Policyholder surplus increased slightly, from $1.01 trillion to at the end of 2023 to $1.07 trillion in 2024, but insurers’ rate of return on average policyholders’ surplus jumped from 3.6% at the end of 2023 to 9.1% in the first half of 2024.
The report shows that the first half of this year has been characterized by an increase in non-traditional CAT activity, including numerous convective storms as opposed to larger events.
“After years of consistent losses, premium growth is helping the overall industry move towards stabilization, with positive first-half underwriting gains for the first time since 2021,” Saurabh Khemka, co-president of underwriting solutions at Verisk, said in a release. “To maintain this momentum, it is critical we continue to address the evolving risks that challenge society today, especially the factors that continue to drive increased personal auto and homeowner rates.”