US Property-Casualty Underwriting Losses Persisted during First Half

Despite strong premium growth, the US property-casualty insurance industry continued to generate significant underwriting losses during the first half of 2023, according to Fitch Ratings.

The rating agency said it expects the industry's results to improve during this year's second half as price increases continue to take hold. Still, uncertainty remains regarding future catastrophe losses, the effects of inflation on loss costs, and loss reserve experience, Fitch said.

Fitch has a neutral outlook for the US property-casualty insurance sector, expecting the sector's results to be stable to improving with a gradually emerging recovery in personal auto, continued stability in commercial lines underwriting, and growth in investment income.

Fitch said the US property-casualty industry will have a difficult time matching last year's 102.8 percent combined ratio. The US property-casualty industry posted a 104.4 percent combined ratio during this year's first 6 months, driven by higher natural catastrophe losses and a lack of improvement in personal auto results. The industry posted a 100.0 percent combined ratio over the same period in 2022.

The US property-casualty industry saw its policyholders' surplus increase by 5.4 percent during the first half of 2023 to again top $1 trillion as the equity market recovery contributed to large unrealized investment gains, Fitch said.

The sector's direct written premiums increased by 8.6 percent year over year during the first half, while net written premiums increased by 8.0 percent. Commercial lines direct written premium increased by 6 percent, a reduction from the growth rates commercial lines reported in 2021 and 2022, according to Fitch.

The commercial lines loss ratio remained favorable, with a 56 percent direct loss ratio during the first half of 2023 compared to 53 percent during the same period last year, Fitch said.

"Commercial lines are positioned to maintain favorable underwriting results through 2023, but future performance is reliant on pricing actions keeping pace with loss cost trends, which will prove challenging under more volatile economic conditions," the Fitch Wire report said.