According to a new AM Best report, weather-related losses continued for the U.S. property & casualty (P/C) insurance segment in 2022, putting pressure on financial results in a year that also saw a 40-year high for inflation and the second-costliest catastrophe event on record.
Despite auto insurers’ best efforts to deal with rising severity, supply chain issues, and increased medical costs, the AM Best report says trends in the personal auto space were the biggest drag on the overall U.S. P&C segment’s results.
AM Best noted that the pricing momentum achieved by P&C firms in 2021 carried over into 2022, but the results of personal auto and homeowners, as well as the volatility that weakened the economy, contributed to an estimated four-point yoy decline in the overall segment’s reported combined ratio, from 100.0 to 104.0.
Furthermore, the personal segment experienced an estimated $34.9 billion underwriting loss for 2022, nearly tripling the prior year level and driving the overall industry to a five-year high underwriting loss.
AM Best states that the deterioration in the personal auto line was primarily responsible for the much larger underwriting loss in 2022, which was reflected in the rise within the segment’s combined ratio to 108.2 from 102.7 in 2021.
On the bright side, the P&C industry’s estimated net investment income increased by $16.9 billion, to an estimated $73 billion.
AM Best added that a $10.8 billion intercompany distribution at one large reinsurer during the year had a significant impact on this result. Simultaneously, significant unrealized losses, estimated at $111 billion, were the primary cause of the 9.4% decline in the P&C segment’s policyholders’ surplus at year-end 2022.
“Despite the unrealized losses and healthy 8.8% growth in net premiums written, the ratio of net writings to surplus is estimated to have increased slightly to 0.8 at year-end 2022, indicating the industry’s solid capital position,” said AM Best Managing Director John Andre.
The report also stated that weather-related losses would continue in 2022, with estimates of U.S. cat-insured losses exceeding $90 billion, including hurricane Ian, which caused estimated losses of $50 billion to $65 billion. Hurricane Ian was the largest disaster event of 2022, and the second-costliest event in history, after Hurricane Katrina in 2005.
Finally, Best noted that pricing for most commercial lines of coverage continued to trend positively in 2022, as the need to combat inflation remains a major influence on industry premium trends.