The U.S. personal insurance sector is positioned for improving underwriting performance in 2024 amid signs that the previous surge in claims severity from higher inflation and supply chain shortages has subsided, combined with rapid written premium growth from large rate increases, Fitch Ratings says.
The U.S. personal lines insurance sector endured a third consecutive year of underwriting losses in 2023, with the sector statutory combined ratio (CR) falling to 107% from 110% in 2022. Personal lines insurance is the largest sector of the U.S. P/C insurance market, representing over 51% of 2023 industry net written premiums (NWP). Private passenger auto insurance (liability and physical damage) is by far the largest product line for the U.S. P/C industry, with NWP of $307 billion in 2023. Written premiums grew by over 14% due to substantial price increases.
Sustained pricing momentum in 2024 and tapering claims trends for personal auto will lead to break-even results or better for the year, though the pace of recovery will vary between insurers. The personal auto line endured uncharacteristic volatility in the past four years as record underwriting profits in 2020 from pandemic-related declines in miles driven and claims frequency shifted to a 112% segment CR in 2022. Substantial rate increases and underwriting actions led to a considerably better ratio of 105% in 2023.
Sharp price increases in the homeowners’ segment will foster improved results in 2024, but potential volatility from natural catastrophe losses and higher reinsurance costs remain a concern. The segment has reported underwriting losses in six of the past seven years, including a poor 111% CR in 2023. Despite no major hurricane-related losses, insured losses from a large number of inland convective storm events and loss severity increases from rising building material and contract labor costs adversely affected results.