Best’s Market Segment Report: Volatile Weather, Rising Personal Auto Losses Drag on U.S. P/C Insurers’ 2022 Results

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OLDWICK - MARCH 07, 2023 07:39 AM (EST)
Weather-related losses persisted for the U.S. property/casualty (P/C) insurance segment in 2022, pressuring financial results in a year that also included a 40-year high for inflation and the second costliest catastrophe event on record, according to a new AM Best report. Trends within personal auto space provided the biggest drag on the overall U.S. P/C segment’s results, despite auto insurers’ best efforts to contend with rising severity, supply chain issues and increased medical costs.

Pricing momentum achieved by P/C companies in 2021 carried into 2022, but personal auto and homeowners’ results and the volatility that weakened the economy contributed to an estimated four-point year-over-year deterioration in the overall segment’s reported combined ratio, from 100.0 to 104.0. The personal lines segment incurred an estimated underwriting loss $34.9 billion for 2022, nearly tripling the prior-year level and driving a five-year high underwriting loss for the overall industry. The deterioration in the personal auto line was primarily responsible for the much larger underwriting loss in 2022, which was also reflected in the rise within this segment’s combined ratio to 108.2 from 102.7 in 2021.

On a positive note, the P/C industry’s estimated net investment income grew a significant $16.9 billion, to an estimated $73.0 billion, marking a considerable rebound from 2021. However, AM Best notes that this result was significantly impacted by a $10.8 billion intercompany distribution at one very large reinsurer during the year. Substantial unrealized losses, estimated at $111 billion, were the primary driver for 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,” AM Best Managing Director John Andre said.

Other highlights in the report include:

• Secondary weather perils, litigation financing and the financial impact of regulatory constraints on requested rate hikes gathered additional momentum in 2022, further adding to the emerging adverse trends in the personal auto segment.


• Weather-related losses persisted in 2022, with estimates of U.S. catastrophe-insured losses in excess of $90 billion, including Hurricane Ian, which generated an estimated $50 billion to $65 billion in losses. It was the largest catastrophe of 2022 and the second-costliest event ever, following Hurricane Katrina in 2005.


• Pricing for most commercial lines of coverage continued trending favorably in 2022, as the need to combat inflation remained a key influence on industry premium trends. Combined with the adverse trend concerning CAT losses, inflation exerted upward pressure on commercial property rates and pricing.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=329424 .

For a video discussion about this report with Andre, AM Best, please visit http://www.ambest.com/v.asp?v=ambrppc323 .

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.