The property and casualty insurance industry’s combined ratio — an indicator of insurance profitability ̵2; is forecast at 100.7 for 2022, up 1.2 points from 2021, according to actuaries at Triple-I and Milliman, a risk management, benefits and technology firm. They presented their findings in a virtual webinar for Triple-I members only.
Combined ratio represents the difference between claims paid and costs and premiums collected by insurers. A combined ratio below 100 represents an insurance gain and a ratio above 100 represents a loss. The industry in 2021 was barely profitable, with a combined ratio of 99.5.
Losses have been driven by significant deterioration in the passenger car line. Dale Porfilio, Triple-I’s head of underwriting, said the 2022 net passenger car combination ratio is expected to be 105.2 – 3.8 basis points higher than 2021, primarily driven by a significant deterioration in auto physical damage coverage.
In most product lines, inflation, supply chain disruptions and geopolitical risks are expected to continue to push insured losses and premium prices higher.
“We forecast 8.5 percent P&C premium growth for 2022,” Porfilio said. “This is lower than the 9.2 percent growth in 2021, but still strong due to the tough market.”
Dr. Michel Léonard, Triple-I Chief Economist and Data Scientist, discussed key macroeconomic trends affecting property/casualty industry performance. He noted that insurance growth continues to be constrained by economic fundamentals, with claims cost increases well above pre-COVID-19 levels and underlying growth below par.
Jason B. Kurtz, a principal and consulting actuary at Milliman, said another year of underwriting losses is likely for the commercial multi-risk line.
“More rate hikes are needed to offset the economic and social inflationary pressures,” Kurtz said. “Social inflation” refers to the effects of litigation costs on insurers’ claim payouts, loss ratios and ultimately how much policyholders pay for coverage.
Kurtz said the line’s multi-year underwriting gains are expected to continue, although margins are likely to shrink further through 2024.
Dave Moore, CEO of Moore Actuarial Consulting, said the 2022 total cost of commercial vehicles is expected to be 101.4 percent.
“We are forecasting insurance losses for 2022 to 2024 due to prior year developments and the effects of inflation — both social inflation and economic inflation,” Moore said.