Pricing rebound in 2023 as US commercial lines harden
The US commercial lines insurance sector is seeing a 2023 rebound in pricing momentum in property lines and, to a lesser degree, in the auto segment, according to Fitch Ratings.
It said an unprecedented four-year hardening phase of the commercial lines underwriting cycle will continue through 2023, driven by weaker loss experience and higher reinsurance costs.
Fitch said US commercial lines are being challenged by slower revenue growth, inflation-based claim uncertainty and less favourable loss reserve experience. “We project the sector will see a combined ratio of 97%–98% for 2023 compared to 96% in 2022. While commercial lines reported statutory underwriting profits in four of the last five years, net written premium growth is likely to slow in 2023 to 6%–7% YoY, compared to 10% in 2022 and 15% in 2021,” it said.
According to Fitch, workers’ compensation continues to post the best product segment underwriting profits, with an average combined ratio of 89% from 1998–2022, as a result of strong premium growth in 2022 from exposure changes, falling claims frequency and highly favourable reserve experience.
However, the commercial auto line combined ratio worsened to 105% in 2022 compared to 100% in 2021. “Despite ongoing commercial auto premium rate increases, claims severity issues tied to higher auto parts and repair costs and litigation exposures will continue to challenge performance in 2023,” said the ratings agency.
