Net income for the private U.S. property/casualty insurance
industry dropped 26% in the first half of 2020, as the effects of
COVID-19 began to hurt insurer underwriting results and investment
gains, according to Verisk (Nasdaq:VRSK), a leading data analytics
provider, and the American Property Casualty Insurance Association
(APCIA).
Net income after taxes fell to $24.3 billion in first-half 2020
from $32.8 billion in first-half 2019. Contributing to that drop
was $1.4 billion in realized capital losses on investment in
first-half 2020, a swing from $4.3 billion in realized capital
gains a year earlier.
Net underwriting gains declined to $4.6 billion in first-half
2020 from $5.4 billion a year earlier. Net written premiums grew
2.8% in first-half 2020, above the 1.0 percent a year earlier, but
significantly below the 6.2% premium growth rate in first-quarter
2020.
Beginning in the middle of March, the COVID-19 crisis led to
large-scale disruptions of daily life and economic activities,
affecting insurance premiums. For some commercial policies where
the premium is determined by sales, payroll, or other
activity-sensitive measures of exposure, economic events directly
led to lower premiums.
Many auto insurers provided premium relief to their
policyholders as a combination of partial returns of premium,
prospective rate reductions, and policyholder dividends. The relief
provided within the first half of 2020 could exceed $10 billion,
according to an analysis by ISO, a Verisk business.
“Slow improvements in the financial performance of the U.S.
property casualty insurance industry were abruptly reversed in the
first half of 2020 due to the compounded effects of COVID-19,
catastrophes, and civil unrest,” said Robert Gordon, senior vice
president for policy, research and international at APCIA. “The
combined ratio rose above 100 percent in the second quarter, and
potential near-record third quarter catastrophe losses are all but
certain to push underwriting results further into negative
territory. In addition to experiencing increased losses, insurers
are facing a significant drop in revenue from the economic
downturn, greater outflows from promised auto insurance rebates to
consumers, and a continuation of historically depressed investment
returns. While the industry remains stable and able to meet its
expected obligations, aggregate policyholder surplus declined $22.1
billion in the first half and the unusual combination of losses and
future uncertainty is weighing heavily on renewals.”
“The most visible impact of COVID-19 on underwriting results in
the first half of 2020 was the reduction of both premiums and
losses, as business in many sectors slowed, auto traffic decreased,
and insurers provided premium relief to customers in both personal
and commercial lines,” said Neil Spector, president of ISO.
“Significant uncertainties remain about the future effects of
COVID-19 and it will take time before we know the full impact on
insurers’ exposures and losses. While our elected officials
navigate the challenges of protecting the U.S. population and
supporting its economy during the pandemic, many insurers are
responding to the challenge by accelerating their digital
transformations to help improve efficiencies, make informed
underwriting and claims decisions, and meet the changing needs of
their customers.”
This year, Verisk launched an online resource page to help
insurers learn about new regulations, access in-depth analysis and
critical insights, and discover solutions being created to address
the effects of COVID-19. Verisk has also forecasted the potential
impact of COVID-19 on commercial lines and developed a web page
that provides future-facing strategies for personal lines insurers
as they adapt to the new normal.
Second-Quarter Results
Insurers’ net income after taxes fell to $6.4 billion in
second-quarter 2020 from $14.9 billion in second-quarter 2019, and
their combined ratio deteriorated to 100.2% in second-quarter 2019
from 98.9% a year earlier.
Net written premiums fell $0.7 billion, or 0.4%, to $159.7
billion in second-quarter 2020 from $160.3 billion in
second-quarter 2019.
Net underwriting results deteriorated to $1.6 billion in losses
in the second quarter 2020 from $0.1 billion in net underwriting
gains a year earlier.
View the full report from Verisk and APCIA.
About Verisk Verisk (Nasdaq:VRSK) is a
leading data analytics provider serving customers in insurance,
energy and specialized markets, and financial services. Using
advanced technologies to collect and analyze billions of records,
Verisk draws on unique data assets and deep domain expertise to
provide first-to-market innovations that are integrated into
customer workflows. Verisk offers predictive analytics and decision
support solutions to customers in rating, underwriting, claims,
catastrophe and weather risk, global risk analytics, natural
resources intelligence, economic forecasting, and many other
fields. Around the world, Verisk helps customers protect people,
property, and financial assets.
Headquartered in Jersey City, N.J., Verisk operates in more than
30 countries and is a member of Standard & Poor's S&P
500® Index and part of the Nasdaq 100 Index. In 2018 and 2019,
Forbes named Verisk to its World’s Best Employers list. For more
information, please visit www.verisk.com.
About APCIA Representing nearly 60 percent of
the U.S. property casualty insurance industry, the American
Property Casualty Insurance Association (APCIA) promotes and
protects the viability of a competitive private insurance market
for the benefit of consumers and insurers. APCIA represents the
broadest cross section of home, auto, and business insurers of any
national trade association. APCIA members represent all sizes,
structures, and regions, which protect families, communities, and
businesses in the U.S. and across the globe. For more information,
visit www.apci.org.
Contact:
Joe Madden for Verisk Joseph.Madden@verisk.com 201-232-4486
Jeffrey Brewer for APCIA jeffrey.brewer@apci.org
847-553-3763
Loretta Worters for I.I.I. lorettaw@iii.org 212-346-5575
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