The ISO and Property Casualty Insurers Association of America (PCI) recently released a report looking at the first half of 2017. It’s — as always — a mixture of good news and bad.
For net income, the news is bad. Net income after taxes fell to $15.5 billion in the first half of 2017 from $21.8 billion the first half of last year. That’s a huge drop of 29.2%. Falling net income also affects overall profitability. That’s the annualized rate of return on average policyholders’ surplus.
It fell to 4.4% from 6.4%.
Fret worthy statistics — yes — but the ISO and PCI say don’t worry too much. The industry is still profitable. Profits, however, have been severely impacted by catastrophe losses of $17.2 billion. That’s up $3.2 billion for the first half of 2016.
This is where the good news starts and it begins with the ISO/PCI report and ends with one issued by Willis Towers Watson. The ISO/PCI report said net written premium growth rose 4.1% in the first half of 2017. That’s up from 3.1% a year ago.
Net investment gains jumped from $26.6 billion for the first half of 2016 to $27.1 billion this year. Surplus is at an all-time high at $717 billion — that’s up $16.1 billion.
Willis Towers Watson’s 2018 Marketplace Realities report also promises good news. It predicts commercial insurance rate hikes for 2018 to help offset the losses that hit the industry hard because of this year’s very active hurricane season.
Underwriters — the report contends — will be pushing for higher rates to replenish capital that was depleted because of losses. Buyers could find the soft market on commercial prices at an end.
At least temporarily.
By the way, the report said price hikes won’t be noticed until the first or second quarter. The increases will be significant in some lines of insurance:
• Non-cat risks — Flat to +5%
• Cat-exposed risks — +10% to +20%
• Cat-exposed with losses — +20% to +25%
• General liability — Flat to +3%
• Umbrella — Flat to +3%
• Excess — Flat
• Workers comp — –2% to +2%
• Auto — +3% to +8%
• International — 10% to –5%; –5% to flat for Defense Base Act coverage
• Directors and officers — –7% to flat
• Errors and omissions — Flat to +5% (good loss experience)
• Employment practices liability — Flat to +5%; +5% to +15% in California
• Fiduciary — –5% to +5% (flat to +12% for large concentrations of stock in benefit plans
Cyber — –3% to +5% (non-POS retailers and non-large health care); competitive for first-time buyers
• Most risks — –2% to flat
• Active hot spots — Capacity limited
• Non-tier 1 — –5% to flat
• Tier 1 — Flat
• Cargo, Hull — Flat to +10%
• Liability — –5% to +10%
Moving to today, the second quarter of 2017 was much better for insurance agents than insurance companies. Reagan Consulting’s Organic Growth and Profitability (OGP) Survey says organic growth in the time period hit 4.6%. That compares to 3.9% in the first quarter — the weakest growth rate since 2011.
Reagan Consulting’s Kevin Stipe said a stronger-than-expected economy, better P&C pricing and organic gains in commercial and personal lines helped.
• Organic growth in commercial lines jumped 3.9% from 3.1% a year ago
• Personal lines organic growth rose to 2.3% from 1.7% — the fastest rise since 2013
By the way, the new sexual harassment reports out of Hollywood and in politics may help the specialty line, employment practices and liability insurance (EPLI) grow by $500 million by the end of 2019. There are other factors, too, but that one does come to mind.
MarketStance — a research firm — said last year U.S. companies shelled out $2.2 billion on policies to take care of accusations of sexual harassment, racial discrimination and unfair dismissal. This year the firm thinks that figure will grow and by 2019 it will be $2.7 billion.
Source links: Insurance Journal — link 1, link 2, link 3, PropertyCasualty360.com, Insurance Business America