Details produced by the Swiss Re Institute Economic Insights report showed inflation causing claims costs to rise from 5% to 7.5% in 2022. Things aren’t going to be much better in 2023.
“In 2023, we expect that inflation should lead to an additional increase of 3.5-6.5%,”the report said. “Inflation may be easing, but claims severity pressures in P&C remain.”
Property insurers saw a inflation and rising construction costs raise costs by 6% to 13% in 2022. In 2023, Swiss Re says those costs will jump another 3% to 10%.
“The high-inflation environment has been expensive for P&C insurers. The losses from Hurricane Ian at the end of 2022 contributed to a worsening of the P&C loss ratio, but the main driver was the sharp increases in economic inflation,” the report said.
Even though rates averaged a 13% hike in 2022, the report concludes that rate increase in 2022 just were not enough to offset up pressures of social inflation and increased loss frequency in motor and property lines.
Inflation is driving the problems.
“Cost increases in construction, which peaked in 2022, should ease but will remain high by historical standards, as building activity is still strong and China’s re-opening will increase global demand for commodities,” the report said.
Source link: Insurance Journal — http://bit.ly/3FS8Z0Y