US Commercial Lines Insurers Likely To See 2022 Underwriting Gains

US commercial lines property-casualty insurers are poised to realize favorable underwriting gains this year, barring unusually large natural catastrophe losses, according to Fitch Ratings.

In a new special report, US Commercial Lines Market Update (Sharp Pricing Actions Lead to Significant Underwriting Improvement (May 19, 2022), Fitch Ratings says that insurers' premium growth will likely moderate this year, however, as their profits peak in the current market cycle amid the potential impacts on their loss-cost trends from higher inflation, increased litigation, and economic uncertainty.

The rating agency noted that US commercial lines insurers' underwriting performance returned to profitability in 2021, with significant declines in both loss and expense ratios for the year. The insurers' combined ratio of 97.6 percent was the segment's best since 2015, Fitch said. Fitch predicted that US commercial lines insurers' combined ratio will fall into the 95 percent to 96 percent range for this year, as their prior underwriting actions show benefits in their earned premiums.

The sector's net written premium grew by 15 percent, Fitch said, boosted by both continued premium increases in most product lines and growth in exposures as economic activity rebounded from the COVID-19 pandemic. As the size of rate increases declines, the insurers' revenue will likely moderate in 2022, Fitch said, while remaining favorable against historical levels.

Workers compensation remains the most profitable individual commercial lines segment, Fitch said, with a 90 percent average combined ratio from 2017 to 2021. Those results are likely unsustainable, however, according to the rating agency, given competitive market forces and the potential for higher medical inflation.