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Home / Insurance / Triple-I Blog | Ian, Passenger car, Inflation, Geopolitics driving worst P&C emissions results since 2011

Triple-I Blog | Ian, Passenger car, Inflation, Geopolitics driving worst P&C emissions results since 2011



The property and casualty insurance industry’s underwriting profitability is forecast to have worsened in 2022 compared to 2021

, driven by losses from Hurricane Ian and significant deterioration in the auto industry, making it the worst year for the non-life insurance industry since 2011, actuaries at Triple-Jag and Milliman – an independent risk management, benefits and technology – reported today.

The quarterly report, presented at a members-only webinar, also found worker profitability continued its multi-year profitability trend and general liability is expected to earn a small underwriting profit, with continued strong premium growth due to the tough market.

The industry’s combined ratio – a measure of insurance profitability where a number below 100 represents a profit and one above 100 represents a loss – deteriorated by 6.1 points, from 99.5 in 2021 to 105.6 in 2022.

Rising interest rates, geopolitical risk

Michel Léonard, Triple-I’s Chief Economist and Data Scientist discussed key macroeconomic trends affecting the property/casualty industry, including inflation, claims costs, geopolitical risk and cyber.

“Rising interest rates will have a chilling effect on underlying growth across P&C lines, from residential to commercial real estate and auto,” he said, adding that 2023 “is shaping up to be another year of historic volatility. Persistently high inflation, threats of a recession and rising unemployment top our list of economic risks.”

Léonard also noted the magnitude of geopolitical risk, saying, “The threat of a major cyber attack on U.S. infrastructure tops our list of tail risks.”

“Tail risk” refers to the chance of a loss occurring due to a rare event, as predicted by a probability distribution.

“Russia’s weaponization of gas supplies to Europe, China’s ongoing military exercises that threaten Taiwan and the potential for election disruption in the United States contribute to making geopolitical risk the highest in decades,” Léonard said.

Cats drive insurance losses

Dale Porfilio, Triple-I’s head of underwriting, discussed overall P&C industry forecasts and exposure growth, noting that catastrophe losses in 2022 are expected to be comparable to 2017.

“We forecast premium growth to increase by 8.8 percent in 2022 and 8.9 percent in 2023, primarily due to tough market conditions,” Porfilio said. “We estimate catastrophe losses from Hurricane Ian will push the total cost to homeowners to 115.4 percent, the highest since 2011.”

Jason B. Kurtz, a principal and consulting actuary at Milliman — a global consulting and insurance company — for a commercial multi-risk line said another year of underwriting losses is likely.

“Issuing losses are expected to continue as more interest rate hikes are needed to offset catastrophe and economic and social inflationary lossesKurtz said.

For the commercial property line, Kurtz noted that Hurricane Ian will threaten underwriting profitability, but that the line has benefited from significant premium growth. “We forecast premium growth of 14.5 percent in 2022, following growth of 17.4 percent in 2021.”

As for commercial vehicles, Dave Moore, president of Moore Actuarial Consulting, said the 2022 overall ratio for that line is nearly 6 points worse than 2021.

“We forecast insurance losses for 2023 to 2024 due to inflation, both social inflation and economic inflation, loss pressure and prior year negative loss trends,” he said. “Premium growth is expected to remain high due to tough market conditions.”

“After a sharp decline to 47.5 percent in 2Q 2020, quarterly direct loss ratios resumed their upward trend, averaging 74.2 percent over the past four quarters,” Porfilio said. “Low miles driven in the first year of the pandemic contributed to a favorable loss experience.”

Since then, Porfilio continued, “Miles driven have largely returned to 2019 levels, but with riskier driving behaviors, such as distracted driving and higher inflation. Supply chain disruptions, labor shortages and more expensive parts all contribute to current and future loss pressures.”

Overall, loss pressures from inflation, risky driving behavior, rising catastrophe losses, and geopolitical turmoil are driving the need for interest rate increases to restore insurance profits.


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