Property and Casualty Insurers Experience Underwriting Loss in 2021, But Remain Strong
26 May 2022 - 11:00PM
Despite experiencing an underwriting loss, the property/casualty
insurance industry ended 2021 strong and able to support
policyholders, according to a report from Verisk (Nasdaq: VRSK), a
leading global data analytics provider, and the American Property
Casualty Insurance Association (APCIA).
In 2021, the insurance industry experienced a $3.8 billion net
underwriting loss, after a $5.2 billion underwriting gain in 2020,
as incurred losses and loss adjustment expenses grew 11.1% while
earned premiums only grew 7.4%. The combined ratio deteriorated as
well, to 99.6% after 98.6% in 2020.
The deterioration in underwriting results was driven by growth
in non-catastrophe losses, especially for personal auto. The
insured losses from catastrophes in 2021, including Hurricane Ida
in September, remained significant, even though associated net
incurred losses and loss adjustment expenses declined to $56.3
billion in 2021 from $61.4 billion in 2020.
The industry saw a slight increase in net income after taxes to
$61.9 billion, from $60.3 billion a year prior, helped by growth in
investment income and in realized capital gains. A combination of
factors, including significant unrealized capital gains, propelled
policyholders’ surplus to a new record of $1,032.5 billion.
Insurers’ rate of return on average policyholders’ surplus, a
measure of overall profitability, declined to 6.4% from 6.9% in
2020.
“Although insurers’ net earned premium increased 7.4% and
surplus topped a trillion dollars, losses and loss adjustment
expenses (LLAE) grew at an even faster rate to 11.1% in 2021,
causing an underwriting loss for the year,” said Robert Gordon,
senior vice president, policy, research & international for
APCIA. “Insurers’ combined ratio increased to 99.6%, and investment
yields dropped to their lowest level since at least 1960. Net
non-catastrophe LLAE increased 17.1%, excluding development of LLAE
reserves. Insurers’ surplus growth was driven in part by $109.2
billion in capital gains on investments, although some of those
gains may have already significantly deteriorated with the strong
headwinds in the bond and equity markets in early 2022. While the
industry balance sheet is strong enough to meet the commitments to
insureds, it is facing emerging challenges from the significant and
increasing impact of catastrophic weather events, cyber risk and
significant price and social inflation/lawsuit abuse.”
“Last year brought strong premium and surplus growth as the
economy recovered from COVID-19,” said Neil Spector, president of
underwriting solutions at Verisk. “Importantly, this capital
cushion bolsters insurers’ ability to respond to future claims as
well as looming uncertainties in capital markets, global political
risks and record inflation. In these complicated times, access to
accurate underwriting data and advanced analytics will help equip
insurers with the tools they need to weather the storms facing
them.”
Fourth Quarter Sees Continued Growth in Net Written
Premiums
The industry’s net income fell to $19.7 billion in
fourth-quarter 2021 from the record $25.1 billion in fourth-quarter
2021, and the annualized rate of return on average surplus fell to
7.9% from 11.3% a year prior. The 7.9% is close to the 30-year
average of 7.8% for rates of return.
Net written premiums rose $13.8 billion, or 8.9%, compared to
2020. Net underwriting gains declined to $1.8 billion from $4.9
billion in fourth-quarter 2020, and the combined ratio deteriorated
to 100.0% from 98.2% a year prior.
Read the full report from Verisk and APCIA.
About VeriskVerisk (Nasdaq: VRSK) provides
data-driven analytic insights and solutions for the insurance and
energy industries. Through advanced data analytics, software,
scientific research and deep industry knowledge, Verisk empowers
customers to strengthen operating efficiency, improve underwriting
and claims outcomes, combat fraud and make informed decisions about
global issues, including climate change and extreme events as well
as political and ESG topics. With offices in more than 30
countries, Verisk consistently earns certification by Great
Place to Work and fosters an inclusive culture where
all team members feel they belong. For more,
visit Verisk.com and the Verisk Newsroom.
About APCIAThe American Property Casualty
Insurance Association (APCIA) is the primary national trade
association for home, auto, and business insurers. APCIA promotes
and protects the viability of private competition for the benefit
of consumers and insurers, with a legacy dating back 150 years.
APCIA members represent all sizes, structures, and
regions—protecting families, communities, and businesses in the
U.S. and across the globe.
- 2021_Q4_By_The_Numbers_1200x630_v3
Michelle Pantina
Verisk
551-500-7327
michelle.pantina@verisk.com
Jeffrey Brewer
APCIA
847-341-0361
Jeffrey.Brewer@apci.org
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