U.S. property/casualty insurers are responding to higher inflation and natural catastrophe losses with rate increases when possible and exits when not, Swiss Re Ltd. said Wednesday in a report.

Halts to new business and non-renewals in certain lines were among the steps taken by insurers as they retrenched from catastrophe-prone markets such as California, Florida and Louisiana, in the first half of this year, Swiss Re said.

Underwriting actions have extended to commercial property and personal auto lines even while the focus is on homeowners insurance, according to Swiss Re Institute’s June U.S. Property-Casualty Outlook.

Insurers cite the economic environment, natural catastrophes, inflation and reinsurance costs in some cases as factors that have prompted a surge in expenses resulting in underwriting losses, Swiss Re said.

Swiss Re continues to expect the sector to deliver an estimated return on equity of 8.0% in 2023 and 9.5% in 2024, up from 2.5% last year.

Higher premium rates and investment yields should drive improved return on equity for U.S. property/casualty insurers this year and in 2024, as claims severity eases, according to the report.

That said, the industry’s first-quarter return on equity of 3.6% “highlights the downside risks” to its forecast, Swiss Re said.

Loss costs jumped 20% in the first quarter, outweighing strong premium growth and resulting in a net underwriting loss of $7.5 billion.

Persistent inflation and natural catastrophe losses led to a first-quarter net combined ratio of 102.6% for the industry – the worst first-quarter underwriting result in more than a decade, Swiss Re said.

In contrast, interest rates boosted earnings as investment yields contributed 33% more to net income than they did a year ago.

Commercial property rate increases are accelerating, while rate gains in liability are generally steady, or slowing, Swiss Re said.

Overall, rate increases will continue through this year as inflation, natural catastrophes and geopolitical uncertainties exert upward pressure on claims and operating costs, Swiss Re said.

Swiss Re maintains its premium growth estimates at 7.5% this year and 5.5% in 2024.