2023 Underwriting — A Combined Ratio Worry

The Insurance Information Institute (Triple I) and Milliman took a look at underwriting in 2023. Triple I CIO Dale Porfilio said P&C insurance will end up with a combined net ratio of 102.2.

That’s a smidge below the 2022 finish of 102.4.

However, Porfilio said the drop is mostly due to the poor performance of underwriting in personal lines and catastrophe losses. “Catastrophe losses in the first half of 2023 were the highest in over two decades, slightly higher than the record set in first half of 2021.”

That said, he sees the personal lines auto net combined ratio improving but the prediction is that it will be 109.5 at year’s end. Porfilio added that replacement costs rose an incredible 55% between 2019 and 2022. That pushed the underwriting loss for 2023 and will be mostly responsible for the losses through 2025.

Homeowners — a big driver of catastrophe loss increases — right now sits at a combined ratio of 109.5. By year’s end, Porfilio thinks homeowners will be 104.8 and that’s close to what it ended at in 2022. The reason being that most of the devastating losses happened at the first of the year in 2023.

Commercial lines are doing very well and Portilio says they have a “strong overall performance.” He’s predicting premium growth of 9% in 2023 and 9% in 2024 with a slight drop to 7% in 2025.

The report ends with a positive and Porfilio predicts a combined net ratio that improves incrementally from 2023 to 2025 and, best of all, he thinks commercial lines will see a small underwriting profit in 2025.

Triple I chief economist, Michel Leonard says inflation and rising interest rates have had a huge impact on underwriting and insurer performance. Leonard expects P&C growth to go along the lines of the GDP through 2024.

Leonard says supply chain and labor disruptions are ending so replacement costs — a huge driver of auto losses — will increase at a slower and lower rate than overall inflation. He also predicts that the consumer price index (CPI) will keep it’s mid-to-upper 3% range through 2023 and into 2024.

Milliman principal and consulting actuary, Jason Kurtz said the real bright spot in commercial lines is workers’ compensation. He predicts underwriting profitability through 2025.

Source link: Insurance Business America — https://bit.ly/3KH5TPR

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