According to AM Best's new Best's Special Report, "Despite Near-Record Catastrophe Losses, U.S. Property/Casualty Insurers Post Strong Gains," U.S. publicly traded P/C insurers posted gains in all key revenue and income measures. These gains more than compensated for the second-worst year on record in terms of multibillion-dollar weather and climate disasters.
According to the report, one area of concern is a 4.0-percentage-point increase in the loss ratio as traffic patterns returned to pre-pandemic levels, worsening loss severity on higher medical costs and expensive repairs. "The benefit of fewer drivers on U.S. roadways during the peak of the pandemic was offset by reports of drivers traveling at higher average speeds—the reason for the rise in fatality rate, which showed no signs of abating in 2021," said Christopher Graham, senior industry analyst, industry research and analytics, AM Best.
Other highlights of the report include:
- The cost of natural disasters for P/C insurers approached $100 billion in 2021, resulting in a median combined ratio of 97.4 on a GAAP basis among publicly traded P/C insurers.
- Premium revenue increased by 10%, following a 2.9 percent increase in 2020, the lowest increase in several years. The premium increase in 2021 was due to insurers targeting coverage lines that have been producing unfavorable results, such as general liability, professional liability, commercial automobile, and catastrophe-exposed property, through approved rate actions and the prudent use of pricing tools for better price adequacy.
- Overall P/C revenue increased 19.7 percent to $711.1 billion in 2021, driven by an increase in premium revenue and a double-digit increase in net investment income, as well as a $6.7 billion net realized gain on investments, compared to a nearly $15 billion loss in 2020.
- In 2021, debt will fall by 2.3 percent, while shareholders' equity will rise by 8.1 percent. This resulted in a moderate decrease in the debt-to-equity ratio, which fell from 27.8 to 25.1.
To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=319008.
AM Best is a global credit rating agency, news publisher, and data analytics company that specializes in the insurance industry. The company is headquartered in the United States and operates in over 100 countries, with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore, and Mexico City. Visit www.ambest.com for more information.