P/C underwriting results to deteriorate in 2022: Insurance institute

The 2022 combined ratio for the property/casualty insurance industry is forecast to worsen to 105.6% from 99.5% in 2021, according to a report Thursday from the Insurance Information Institute.

The decline in underwriting results was driven by Hurricane Ian and “significant deterioration in the personal auto line, making it the worst year for the P&C industry since 2011,” the report said.

Underwriting losses are expected for the commercial multiperil line, for which the 2022 net combined ratio is forecast to worsen to 107.6%, 1.4 percentage points higher than 2021, according to Jason B. Kurtz, principal and consulting actuary at consulting and actuarial firm Milliman Inc. Premium growth of 14.5% is forecast in 2022, following 17.4% growth in 2021, he said.

The 2022 combined ratio for commercial auto lines is forecast to be 104.7%, nearly 6 percentage points worse than 2021, according to Dave Moore, president of Moore Actuarial Consulting LLC. “We are forecasting underwriting losses for 2023 through 2024 due to inflation, both social inflation and economic inflation, loss pressure and prior-year adverse loss development,” he said. “Premium growth is expected to remain elevated due to hard market conditions.”

Overall property/casualty industry underwriting premium growth is forecast to increase 8.8% in 2022 and 8.9% in 2023, primarily due to hard-market conditions, according to Dale Porfilio, chief insurance officer of the institute.

Loss pressures and a hard market are expected to continue due to inflation, supply chain disruptions, and geopolitical risk, the institute said in a statement.

“Rising interest rates will have a chilling impact on underlying growth across P&C lines, from residential to commercial property and auto,” Michel Léonard, chief economist and data scientist for the institute, said in the statement. “2023 is gearing up to be yet another year of historical volatility. Stubbornly high inflation, the threat of a recession, and increases in unemployment top our list of economic risks.”

Looking at the workers compensation line, Mr. Kurtz noted that underwriting profits continue, although margins are expected to shrink through 2024. “The workers compensation line continues to stand alone, with its multiyear run of strong underwriting profitability forecast to continue for 2022 and into 2023-2024.”