The Property Casualty Insurers Association of America (PCI) and ISO — a Verisk Analytics company — said the first nine months of 2016 wasn’t all that much fun for insurers. At least those months weren’t when compared to the same time period in 2015. And the reasons are many ranging from underwriting troubles to increased catastrophe losses to falling reserves.
Here’s some details:
• The net underwriting loss hit $1.7 billion
• That compares to a $7.3 billion underwriting gain from January to September the year before
• The combined ratio is 99.5 compared to 96.9 for the first nine months of 2015
• Net investment income fell to $33 billion from close to $35 billion
One of the big areas of concern — said PCI’s Robert Gordon — is auto. “Some of the poor performance is a result of increasing loss ratios in the auto lines, which were affected by rising accident frequency and severity,” he said.
The combined ratio for personal lines insurers dropped to an awful 102.9 because of auto losses resulting in rate hikes. Commercial loss ratios were also dismal. “As we move forward, it’s important for all the stakeholders — including consumers, insurers and policymakers — to take significant steps to reduce the growth of auto losses,” Gordon said.
Insurance Information Institute (I.I.I.) chief economist Steven Weisbart was also concerned. He said super low interest rates are putting pressure on insurers to maintain what he calls — healthy — combined ratio. “These days, with investment income below levels that would be produced if interest rates were at higher levels, P/C companies generally need to maintain combined ratios below 95 to earn their cost of capital in a still-challenging interest rate environment,” Weisbart said.
Despite the questions the report generates, Beth Fitzgerald of ISO said promising signs are in the future. “Policyholders’ surplus continued to grow and reached a record high of $688.3 billion. The Federal Reserve raised interest rates in December 2016 and is expected to increase rates further in 2017. Still, it will take time for insurers’ investment yields to improve,” she said.
Other things found in the report:
• Earned premiums $390.7 billion — that’s a 3.6% jump over 2015
• Net written premiums hit $403.8 billion and compares to $393 billion in 2015
• Capital gains fell to $5.6 billion from 8.8 billion
• Net investment gains fell to $38.6 billion from $43.7 billion
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