In its Best’s Special Report, titled, “U.S. Property/Casualty Top Line Premiums Up, Loss Ratio Deteriorates Through Third-Quarter 2021,” also notes that the industry’s direct loss ratio saw some deterioration, to 62.8 from 60.2 in the same prior-year period, as direct incurred losses increased by more than direct premiums written. In the first three quarters of 2019, the last pre-pandemic year, the industry recorded a direct loss ratio of 59.8.
“Although premium volumes have rebounded with the pandemic slowdown, natural catastrophe insured losses in 2021 were nearly double that of 2020, mainly from Hurricane Ida,” said Christopher Graham, senior industry analyst, AM Best.
According to the report, for specific lines such as commercial auto and general liability, it is uncertain whether recent premium growth has effectively countered rising loss costs and added pressure from inflation. Auto and homeowners insurers are seeing inflation put pressure on their loss costs, whether it be the costs of repairs and replacement or rental vehicles, or of lumber and other building materials. Underwriters of farmowners coverage also could feel the inflationary impact on the value of crops and equipment replacement.
“Growing inflation will likely affect the profitability of all major P/C lines of coverage, especially those especially those insuring long-tail lines of coverage with significant outstanding reserves,” said David Blades, associate director, industry research and analytics, AM Best. “Trends related to social inflation and nuclear jury verdicts also could intensify those concerns.”
To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=316872.