The American Property Casualty Insurance Association (APCIA) and the ISO say the U.S. property and casualty insurance industry set a record in the first quarter of 2020. It’s not a positive record that is being blamed on the stock market’s schizophrenic ups and downs in the first quarter. That behavior has impacted insurer investments and surplus levels and it is dropping surplus levels that set the record.
They dropped $771.9 billion.
Neil Spector of the ISO said all other insurance factors remained stable, the dip in the surplus took it to levels of the mid-1980s.
“The historic drop in industry surplus in the first quarter was concerning for many insurers, as it began to show the impact of COVID-19 on their results,” Spector said. “But the impact of COVID-19 on the industry is just beginning to unfold.”
He says lots of long-term questions about that impact remain unanswered and pointed to how commercial insurers might respond to COVID, and how premiums will be affected and set in the future. Specter also wonders about how auto insurer losses will be handled after all those rebates and COVID credits.
At the same time, other than the drop in surplus, the first quarter looked pretty good.
* Net income after taxes is $17.9 billion — the same as quarter one in 2019
* Net underwriting had a gain of $6.3 billion — 20% higher than 2019
* Net written premiums rose 6.2% to $164.4 billion — up from $154.7 billion
* The combined ratio improved to 94.9 and compares to 95.6 in 2019’s 1st quarter
Here are the negatives and the neutral results from the first quarter:
* Net investment was flat at $13.2 billion
* Realized capital gains fell to $1.1 billion from $1.6 billion in quarter one of 2019
* That is $14.4 billion in net investment gains — $500 million less than 2019
* The annualized rate of return on average surplus fell to 8.8%
* It was 9.4% in the first quarter of 2019
APCIA senior vice president Robert Gordon said the year started out well and then COVID hit. The impact — he says — has been profound.
“Property/casualty insurers started the year with solid net written premium growth, but that was the calm before the storm,” Gordon said. “By the end of the first quarter, insurers experienced their largest-ever quarterly surplus decline as the stock market suffered its largest drop since 1987 and interest rates reached a record low.”
The good news — Gordon added — is that the insurance industry is well-capitalized. However, some carriers are going to face coronavirus exposure. He also points out the industry continues to face the possibility of legislated retroactive COVID coverage by politicians being pushed by business.
Source link: Carrier Management — https://www.carriermanagement.com/news/2020/07/28/209600.htm