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Triple-I Blog | Triple-I / Milliman report: 2020 Turmoil charges fee on P / C insurer's finances



The global pandemic and costly natural disasters will contribute to a projected 1

01.7 percent for US real estate / accident insurance companies by 2020, higher than the 98.8 that the industry published last year, according to the latest Underwriting Projections: 2020-2022 report from Insurance Information Institute (Triple-I) and Milliman.

The combined ratio is the percentage of each premium dollar that a P / C insurance company spends on receivables and expenses. An increase in the co-relationship means that the financial results deteriorate, while a decrease means that they improve.

By 2020, insurers are expected to pay nearly $ 1.02 (101.7) in damages and costs for every premium dollar they collect. In 2019, they paid about 99 cents (98.8) on each premium dollar in receivables and expenses.

The latest report is slightly rosier than previous forecasts. For 2020, the P / C insurer's annual premium growth is estimated to be 1.5%, an improvement from the decline of 0.5% that was calculated three months ago, the report stated.

“Our estimates of premium growth are quite closely linked to economic indicators. Nominal GDP estimates for 2020, although still showing shrinkage, have improved. This, plus a more nuanced understanding of how insurers booked personal auto-feedback, helped us revise our premium estimates, says Jason B. Kurtz, FCAS, MAAA, Principal & Consulting Actuary, Milliman.

In addition, the latest report contains more information on how the industry is performing financially so far. Archived first half-year results give a good idea of ​​how premium and insurance loss trends affect the result.

"We can compare the loss ratio for this year against last year and last year and after a couple of quarters we can fine-tune our forecast," Kurtz said. "And we know a lot more about disaster losses, which are usually the biggest wildcard, and the third quarter is when the worst disasters usually hit."

For most business areas, the forecast changed slightly from three months ago. Premium forecasts for routes such as general liability and commercial car insurance were affected due to the economic forecast.

“For example, in a commercial car, we thought that the increase in online shopping would affect exposures more than it seems to have done. But in terms of insurance results, we did not change things much. Prices are higher, as we expected, and these lines are still struggling with social inflation, ”said James Lynch, FCAS, MAAA, Senior Vice President and Chief Actuary, Triple-I. growth of 5 to 6 percent for 2021-22, slightly lower than the previous forecast from Triple-I and Milliman.

What to look for

There is still a lot of uncertainty regarding the pandemic. "The industry continues to struggle with how much impact it will have," Lynch said. "There is more security than three months ago, but it still leaves a lot of uncertainty," he said. "Our stance remains where it was – the net loss effect will be equivalent to a major hurricane – but as industry veterans know, some major hurricanes hit harder than others."

The path the economy is taking as a result of the pandemic is also important, Kurtz added. "Gross domestic product (GDP) rose the fastest in US history last quarter, but the re-emergence of COVID cases may mean a new barrier – perhaps softer than what we saw in the spring, but each shutdown triggers a slowdown. So we may see a recession, and that suppresses premium growth. "He noted that a K-shaped recovery would be good for some parts of the US economy while it would not be good for others. Another Coronavirus Aid, Relief and Economic Security (CARES) Act that puts money in the hands of individuals and companies is likely to drive the economy as it did in the spring, the report said. Liability protection for company resumption would be beneficial to the industry. "Congress can address that in the lame duck session or next year, but we'll see," Kurtz said.

The quarterly report was presented on November 17 at an exclusive virtual webinar for members moderated by Sean Kevelighan, Chief Executive Officer, Triple-I.

"This webinar series is another example of how the Insurance Information Institute is modernizing and renewing," Kevelighan said. "Under the leadership of our Chief Actuary, James Lynch, Triple-I now provides its members with fast, data-driven, and unique insights into the insurance industry's insurance forecasts."
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