Analysis Projects 103.8 Percent 2023 Property-Casualty Combined Ratio

The property-casualty insurance industry is poised to post a 103.8 percent net combined ratio for 2023, according to the latest underwriting projections by actuaries at the Insurance Information Institute (Triple-I) and Milliman.

The Triple-I and Milliman cited severe convective storm losses that were the highest in decades as being a significant factor in the industry's 2023 combined ratio.

Hard markets are continuing in 2023, with property-casualty insurers' net written premium growth forecast at 8.3 percent for the year, according to the quarterly report, Insurance Economics and Underwriting Objections: A Forward View. The report was presented to Triple-I members on a November 2 webinar.

"P-C growth has improved in 2023, growing 1.3 percent versus 2.1 percent for overall gross domestic product (GDP)," Michel Léonard, chief economist and data scientist at Triple-I, said in explaining the findings and key macroeconomic trends affecting property-casualty industry results.

"While many hurdles could derail such improvements, P&C underlying economic growth is currently positioned to increase faster than overall GDP by 2.6 percent versus 1.7 percent in 2024 and by 4.5 percent versus 2.0 percent in 2025," Dr. Léonard said.

According to Dr. Léonard, the top risk scenarios facing the property-casualty industry in 2024 include geopolitics, weakening employment, and gross domestic product contraction. Property-casualty replacement costs are another area of concern, he said, noting that between 2020 and 2023, property-casualty replacement costs increased an average of 45 percent, while overall US economic inflation was 15 percent over the same period.

Discussing underwriting projections for the property-casualty industry, Dale Porfilio, chief insurance officer at Triple-I, said, "We forecast personal lines to improve each year from 2023 through 2025 but still lag behind strong underwriting profitability in commercial lines."

Jason B. Kurtz, a principal and consulting actuary at Milliman, said commercial property, general liability, and workers compensation continued to be bright spots for the property-casualty industry, while commercial auto remains troubled.

The 2023 net combined ratio for commercial property is forecast at 91.6, according to the Triple-I/Milliman analysis, nearly identical to that in 2022. "Hard market conditions continue into 2023, most notably in catastrophe-prone regions," Mr. Kurtz said. "We expect premium growth to moderate through 2025."

Underwriting losses continue for commercial auto, with the first-half 2023 direct incurred loss at its highest level in at least 15 years. The report forecasts commercial auto combined ratios at 106.7 percent this year, 103.4 percent in 2024, and 102.7 percent in 2025. "These combined ratios lead to a continued need for rate, and that should help drive premium growth going forward," Mr. Kurtz said. "Inflation and prior-year adverse development continue to weigh on this line and continue to bear watching moving ahead."

The analysis projects the 2023 net combined ratio for general liability at 96.9 percent, with workers compensation projected to post a 90.6 percent net combined ratio this year.