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U.S. property/casualty sector premium growth is expected to accelerate into 2021 as the industry’s combined ratio is forecast to deteriorate only modestly, according to a report Thursday from A.M. Best & Co.
While Best sees only a 1.8% increase in net premiums written for 2020 after a 3.4% increase in 2019, the ratings agency sees net premiums written jumping 4.6% in 2021.
“We expect the commercial lines pricing environment to remain firm, with even workers compensation seeing some minor increases,” Best said of 2021.
The sector’s combined ratio is expected to climb one-tenth of a point to 99.3 in 2020 but then see a larger bump to 99.8% in 2021, according to the report.
The 2020 combined ratio includes a 3.4-point increase from catastrophic losses, which was offset by factors including declining loss frequency in personal and commercial auto and “solid” price improvement across most commercial lines, Best said.
“On balance, the improved performance of personal and commercial auto and workers compensation, which together account for greater than half the industry’s net written premiums, more than offset the effect of higher catastrophe losses,” Best said, adding it expects “a rebound in accident frequency and severity is likely for most lines of business in 2021.”
Investment returns continue to vex the insurance industry, remaining anemic in 2020 and 2021, Best said.
Investment yields are expected to improve modestly in 2021 to 2.8%, from 2.7% in 2020. Dropping bond rates early in 2020 as COVID-19 emerged globally is likely to drive a 9% drop in the industry’s net investment income to $52 billion, from $57.3 billion in 2019.
A modest improvement in yield projected for 2021, combined with an increase in invested assets, is expected to bump net investment income back up to about $57 billion in 2021.
More insurance and risk management news on the coronavirus crisis here.
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