Weather Losses, Inflation Pressured Property-Casualty Results in 2022

US property-casualty insurers' financial results were pressured by persistent weather-related losses in addition to the highest rate of inflation in 40 years and the second costliest catastrophe event on record, according to a new report from A.M. Best.

Trends within the personal auto segment provide the biggest drag on US property-casualty results, despite insurers' efforts to address rising severity, supply chain issues, and increased medical costs, Best said in its market segment report, "US P/C Industry Shows Considerable Resilience Despite Continual Challenges."

Pricing momentum property-casualty insurers achieved in 2021 carried over into 2022, Best said. But personal auto and homeowners results and the volatility that weakened the economy contribute to an estimated four-point year-over-year decline in the US property-casualty segment's reported combined ratio, from 100.0 percent in 2021 to 104.0 in 2022.

A more positive development was the US property-casualty industry's estimated net investment income growing from $16.9 billion to $73.0 billion, Best said. Substantial unrealized losses, estimated at $111 billion, were the primary factor behind a 9.4 percent decline in the US property-casualty segment's policyholders' surplus at year-end 2022, according to the rating agency.

The Best report noted that US property-casualty insurers' weather-related losses persisted in 2022, with estimates of insured US catastrophe losses exceeding $90 billion. Those losses included Hurricane Ian, which generated an estimated $50 billion to $65 billion in losses. Hurricane Ian was the largest catastrophe of 2022 and the second-costliest event ever, following Hurricane Katrina in 2005, Best said.

Commercial lines pricing trends remained favorable for insurers in 2022, Best said, as the need to offset inflation factored significantly in industry pricing trends. Inflation combined with the adverse catastrophe loss trend to exert upward pressure on commercial property rates and pricing in 2022, the rating agency said.

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