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U.S. P&C Industry Posts Largest Q1 Underwriting Loss on Record
U.S. property and casualty (P&C) insurers suffered a $7.34 billion net underwriting loss in the first quarter of 2023, driven primarily by some of the worst personal lines results in recent memory, according to a new analysis from S&P Global.
The underwriting loss—the industry’s “first and largest” loss in 12 years—and a combined ratio of 102.2% marked a big swing from the first quarter of 2022 when the P&C insurance industry achieved a net underwriting profit of $4.27 billion and a combined ratio of 96.1%.
“The industry’s first quarter combined ratios were as high or higher in 2001, 2002, 2009 and 2011, peaking at 106.0% in the opening three months of 2001,” S&P Global said in its report. “The largest net underwriting loss in a first quarter from 2001through 2022, unadjusted for inflation, had been $5.63 billion in the first quarter of 2001.”
S&P reported that losses continue to outpace earned premiums across all lines of business, with a 22.1% increase in the first quarter compared to a 9.3% rise in net earned premiums.
The personal lines direct incurred loss ratio of 74.8% was the highest on record for a first quarter, surpassing the previous high of 70.2% in 2001. In the last 88 quarters, the personal lines loss ratio has only exceeded 70% seven times.
The ratings firm attributed the hefty losses to “an unusually active period” for natural disasters and inflationary impacts on the private passenger automobile insurance sector.
In another recent report, S&P outlined the personal auto market’s “historically bad” results in 2022 with a loss ratio of 79.8%,significantly higher than the previous high of 70.9% and well above 2021’s 67.6%.
“Higher net premiums earned through rate increases during 2022 were not enough to overcome the increased claims cost the insurers faced during the year,” S&P said in its report. “The rising costs were spread across both private auto physical damage and liabilities coverages.”
While personal auto rates “… have yet to catch up to the losses insurers are sustaining,” S&P said, “the business line should be close to break even in 2024 and see a sub-100% combined ratio in 2025 and 2026.”.
For more information or to discuss how this affects you, schedule a meeting with a Duncan Financial Group specialist.