The group of 22 P/C insurers rated by Moody’s boosted their net income from $28 billion in 2020 to around $38 billion in 2021, demonstrating healthy growth even while facing high natural catastrophe losses, the credit rating firm reported. Despite the potential for higher claims frequency and severity – particularly in personal auto – the sector appears to be staying ahead of loss trends even as rate increases slow down.
“Good economic growth supports our stable sector outlook,” noted Moody’s in its report. “Following Russia's invasion of Ukraine, insurers will face greater financial market volatility and higher energy prices, which can lead to higher claim costs. The insurers we rate are generally well capitalized and should be able to weather this period of volatility.”
In the commercial casualty segment, Moody’s said insurers showed strong organic premium growth with higher pricing and more insurable exposures.
“Price increases are outpacing loss costs, leading to better commercial lines underwriting results, assuming normalized catastrophe losses, although competitive pressure will temper the pace of rate increases as the year progresses,” the analysts said.
In 2021, catastrophe losses for the insurers rated by Moody’s (including AIG, Allstate, Chubb, The Hartford, Liberty Mutual, Travelers and more) added up to around $16 billion, up from $13 billion in 2020. The high costs warrant additional rate increases for commercial property and homeowners, according to the report. Personal auto insurers also saw higher combined ratios in 2021 as more drivers returned to the roads after the height of the COVID-19 pandemic, repair costs increased, and traffic fatalities rose. Claim costs are rising in both frequency and severity, per the report, a sign that rates will need to rise in 2022.
“Additionally, with more people working remotely, the overall mix of miles driven is shifting away from work commutes toward recreation and other activities, leading to faster driving speeds, higher accident severities, more total loss vehicles, and higher claim costs for personal auto insurers,” said Moody’s.