The 2023 net combined ratio for the property/casualty industry is forecast to be 103.9, with commercial lines at 97.7, outperforming personal lines at 109.9. Record levels of severe convective storm losses are the single biggest driver of the overall adverse results. Hard markets continue with 2023 net written premium growth forecast at 9.0%, according to the latest underwriting projections by actuaries at the Insurance Information Institute (Triple-I) and Milliman.
The quarterly report, Insurance Economics and Underwriting Projections: A Forward View, presented on Jan. 30, at an exclusive members-only virtual webinar.
Michel Léonard, Ph.D., CBE, Chief Economist and Data Scientist at Triple-I, discussed key macroeconomic trends impacting the property/casualty industry’s results including inflation, interest rates and overall economic underlying growth.
“Real gross domestic product (R-GDP) in the third quarter of 2023 accelerated to 4.9%, but economists still expect year-over-year growth of 2.1%,“ said Léonard, noting that for GDP, “revised Q3 numbers did not disappoint but all eyes remain on Q4.” He said that the consumer price index (CPI) continues to slow down to 3.1% as of November, but CPI, less food and energy, is still up 4.0% year over year.
“Year-over-year P&C underlying growth grew 1.3% in 2023 and is forecasted by Triple-I to grow 2.6% in 2024,” said Léonard. “This is below U.S. GDP growth in 2023 and slightly above U.S. GDP growth in 2024. Year-over-year P&C replacement costs increased by 1.1% in 2023 and are forecasted to increase by 2.0% in 2024.”
Dale Porfilio, FCAS, MAAA, Chief Insurance Officer at Triple-I, discussed the overall P&C industry underwriting projections. “The bad news is that the 2023 Q3 incurred loss ratio for homeowners, commercial auto, and commercial multi-peril exceeded our expectations, as 2023 Q3 incurred loss ratios were above historical averages.”
Porfilio elaborated on the industry’s bleak homeowners financial results. “For 2023, the net combined ratio is forecast at 112.3, the worst since 2011,” he said, adding that the 2023 net written premium growth rate of 12.4% is the highest in over 10 years, reflecting rate increases to offset inflationary loss costs. “We expect personal auto and homeowners lines to improve in 2024 and 2025, but to remain unprofitable.”
Jason B. Kurtz, FCAS, MAAA, a Principal and Consulting Actuary at Milliman – a premier global consulting and actuarial firm – said that commercial property and workers’ compensation continue to be profitable, while commercial multi-peril and commercial auto remain troubled.
“Looking at commercial auto, underwriting losses continue, with a projected 2023 net combined ratio of 110.2, the highest since 2017,” said Kurtz. “For 2023 Q3, the incurred loss ratio was the highest in over 15 years, while the 2023 net written premium growth rate of 6% is noticeably lower than the prior two years.”
“For commercial multiperil, the 2023 net combined ratio of 110.3 is forecast to be the highest since 2011,” explained Kurtz.
Turning to workers’ compensation, Kurtz noted “the 2023 net combined ratio of 88.7 is in line with the five-year average of approximately 89. With anticipated net written premium growth of 2% per year from 2023 through 2025, growth will be modest, but the net combined ratio is expected to remain favorable for our forecast horizon.”
Donna Glenn, FCAS, MAAA, Chief Actuary at the National Council on Compensation Insurance (NCCI), identified rate adequacy and medical inflation as two of the industry’s top concerns. “We’ve seen loss costs decline for 10 consecutive years,” Glenn said. She credits a “strong labor market and overall economy” resulting in “payroll increases outpacing loss cost declines.” Further, “NCCI continues to analyze the data with healthy skepticism to identify changes in trends,” Glenn said.
On rising medical costs, Glenn pointed out, “NCCI closely monitors medical price indices and reviews medical fee schedule changes diligently. While costs are increasing, the rate of increase is moderate—in the 2.5-3.5% range.” In response to stakeholder concerns, Glenn revealed that NCCI is developing a medical price index for a quarterly view into medical inflation’s impact on workers’ compensation claim costs.