Solid 2019 results for US P&C insurers but challenges ahead

The private US P&C insurance industry faces considerable challenges in 2020 as the effects of the Covid-19 pandemic unfold, despite seeing solid results in 2019, with increases in net income, underwriting gains and policyholders’ surplus, according to the American Property Casualty Insurance Association (APCIA) and data analytics provider Verisk. The APCIA said net income after taxes rose to $61.4bn in 2019 from $59.6bn in 2018. Net underwriting gains increased to $3.7bn, after $0.2bn of net underwriting losses a year earlier, due in part to high catastrophe losses in 2018. The industry’s surplus reached a record high $847.8bn by the end of the 2019, as the stock market recovered from a significant downturn a year earlier. “The property/casualty industry finished 2019 with modest underwriting gains after two consecutive years of reporting underwriting losses,” said Robert Gordon, APCIA senior vice-president, policy, research and international. “The combined ratio improved slightly year over year but worsened significantly compared to the first half of 2019.” However, he added: “While insurers enjoyed significant capital gains in 2019, the additional surplus has been substantially decimated by subsequent market declines and Covid-19-related expenditures in the first few months of 2020. As we enter a period of increased uncertainty due to the coronavirus, insurers will be closely monitoring legislative, regulatory and lawsuit abuse trends that could negatively impact the industry’s financial stability.” The APCIA and Verisk said there are several factors related to Covid-19 that could affect industry results in 2020, including: Millions of people are staying at home and driving less, leading many insurers to react by returning a portion of personal auto premiums during the pandemic Many businesses had to close or significantly curtail their activities High unemployment rates and declines in consumption and business activity may persist through 2020 The economic effects of the pandemic could suppress insured commercial exposures and limit demand for a wide range of coverages The stock market plunge in first-quarter 2020 could potentially generate significant capital losses for insurers, reversing the recent gains in the industry’s surplus. “Insurers experienced solid results last year, supported by a drop in catastrophe losses and economic growth,” said Neil Spector, president of ISO. “However, insurers are facing a wide range of challenges this year because of Covid-19. The pandemic has already delivered unprecedented shocks to the economy and created much uncertainty about how the remainder of 2020 will shape up. It’s unclear how the pandemic will affect underwriting results and the performance of insurers’ investments in 2020. Like many other businesses, insurers are looking to protect the wellbeing of their staff while dealing with unprecedented operational challenges in their effort to provide uninterrupted service. Carriers need to stay informed of the latest developments in the marketplace and be equipped with robust data and remote technology to meet the challenges they’ll face both now and in the future.” According to Verisk, US property/casualty insurers’ net income after taxes rose to $13.4bn in fourth-quarter 2019 from $10.2bn in fourth-quarter 2018. Their combined ratio improved to 102.1% in fourth-quarter 2019 from 104.6% a year earlier. Net written premiums rose to $152.7bn in fourth-quarter 2019 from $143.7bn in fourth-quarter 2018. Net underwriting losses reduced to $1.7bn in fourth-quarter 2019 from $4.9bn a year earlier.

Solid 2019 results for US P&C insurers but challenges ahead

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