P/C sector positioned for a strong year: S&P

Growth in direct premiums written in the property/casualty sector is forecast to approach 5.8% this year, according to an S&P Global Inc. report released Tuesday.

The overall P/C sector is projected to post a combined ratio of 99.7 for the year, which would make 2021 the fourth consecutive year of underwriting profit for the industry, S&P said.

“The U.S. P&C industry has not produced combined ratios of less than 100% for four consecutive calendar years in the 25 years for which S&P Global Market Intelligence has collected statutory data. Our outlook assumes history will be made in 2021,” S&P said.

For 2020, 2019 and 2018, the ratios were, respectively, 98.7, 98.9 and 99.2. In 2017, the P/C sector posted an aggregate combined ratio of 103.8%.

The pandemic has had an uneven effect on the sector, S&P said.

“For some, the pandemic dragged on premium volume but elevated underwriting profitability to historical highs. For others, premiums and profitability both tumbled,” it said.

To a large extent, the P/C industry has weathered the pandemic well.

“The property and casualty industry’s worst fears regarding the breadth and depth of the impact of COVID-19 did not materialize, particularly in the U.S. market,” S&P said. “Well-worded exclusions in standard commercial package policy forms largely shielded carriers from adverse legal interpretations on business interruption claims.”

There are, however, ongoing challenges facing the sector. “The negative impact of the rising frequency and severity of civil litigation weigh on underwriting results for several key business lines,” S&P said.

The S&P report is based on an analysis of disclosures at the line-of-business level on annual statutory financial statements filed with the National Association of Insurance Commissioners by more than 2,600 U.S.-domiciled P/C insurance companies.