US Property-Casualty Underwriting Loss Grew Significantly in 2022

US property-casualty insurers' key financial results worsened significantly in 2022 from a year earlier, according to data analytics provider Verisk and the American Property Casualty Insurance Association (APCIA).

The US property-casualty industry experienced a $26.9 billion net underwriting loss in 2022, according to Verisk and the APCIA. That loss was more than six times the $3.8 billion underwriting loss the segment posted in 2021. The 2022 underwriting loss was the largest the industry has experienced since 2011.

According to Verisk and the APCIA, the US property-casualty insurance industry's net income dropped 33.6 percent in 2022, falling to $41.2 billion from $62.1 billion a year earlier. Incurred losses and loss adjustment expenses increased 14.1 percent in 2022, while earned premiums grew 8.3 percent.

The US property-casualty industry's combined ratio deteriorated to 102.7 percent in 2022 from 99.6 percent in 2021, Verisk and the APCIA found.

Verisk and the APCIA said the preliminary results are consolidated estimates based on annual statements filed by insurance with regulators and are based on about 94 percent of all business written by US property-casualty insurers.

"The insurance industry is being hammered by increasing input costs, natural catastrophes, legal system abuse, and resistance in some states to adequate rates," Robert Gordon, senior vice president of policy, research, and international at the APCIA, said in a statement.

"Insurers suffered a 14.1 percent increase in incurred losses and loss adjustment expenses (16.6 percent in Q4), contributing to a more than $76 billion contraction in insurers' surplus at a time when loss exposures are rapidly growing," Mr. Gordon said. "In 2023, insurers are faced with a significant challenge to close the rate gap in order to meet their growing cost of capital."

The insurers' policyholders' surplus recovered somewhat from the third quarter's $911.7 billion to $952.4 billion in the fourth quarter but still remains below that of year-end 2021, Verisk and the APCIA said, driven primarily by the large amount of unrealized capital losses accrued during 2022. US property-casualty insurers' rate of return on average policyholders' surplus, a measure of overall profitability, declined to 4.2 percent in 2022 from 6.4 percent in 2021.