P/C insurance suffers worst underwriting loss since 2006

Posted by RJ & Makay on February 7, 2012

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P/C insurance suffers worst underwriting loss since 2006

The U.S. property casualty (PC) insurance industry in 2011 reported its largest underwriting loss since 2006, according to insurance ratings agency A.M. Best.  The industry’s operating performance sharply deteriorated during last year as catastrophe-related losses mounted throughout the year.  Catastrophe events both here and abroad more than doubled the loss amount reported for 2010, A.M. Best said.

The agency estimates that accident-year catastrophe-related losses were about $44.1 billion in 2011, up from about $19.6 billion in 2010.

Personal lines, commercial lines and reinsurers are expected to have large underwriting losses as a result of the catastrophic losses.  The PC industry’s combined ratio is forecast to deteriorate from 101.0 for the full year 2010 to 107.5 for full-year 2011.  Net premiums for written policies increased 3.5%, to $442 billion last year.

The PC industry’s net income after taxes dropped to just under $8 billion for the first three quarters of 2011, compared to net income of just over $27 billion for the prior year’s first three quarters, according to a recent report co-authored by the Insurance Information Institute (III).

The industry’s combined ratio climbed to 109.9 for the first three quarters of last year, compared to 101.2 for the same period on 2010.  It was “the worst nine-month underwriting result since the 114.4 combined ratio for the first nine months of 2001,” said Insurance Services Office (ISO) assistant vice president Michael R. Murray.

“The deterioration in adjusted underwriting results is cause for concern because today’s low interest rates severely limit insurers’ ability to generate incremental investment income,” Murray said.

In 2011, the majority of ratings actions were affirmations, though there were more downgrades than upgrades for the first time since 2005.

A.M. Best maintains a stable outlook for personal lines and U.S. reinsurance segments for 2012.  The outlook for commercial line segment remains negative.

The industry’s operating performance should improve in 2012, according to Best, though insurers still face a challenging environment.

“Fundamentally, the [P&C] insurance industry remains quite strong fundamentally, with capital adequacy ratios remaining high relative to long-term historical averages,”  says Insurance Information Institute president  Robert Hartwig.

RJ & Makay




P/C insurers’ combined ratio for 2011 estimated at 107.5% (http://www.insurancejournal.com/news/national/2012/02/06/234256.htm).  Insurance Journal, February 6, 2012

U.S. P&C 2011 9 mo. net income drops sharply; Combined ratio worst since 2001 (http://www.propertycasualty360.com/2012/01/02/us-pc-2011-9-mo-net-income-drops-sharply-combined).  Property Casualty 360, January 2, 2012

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