According to the latest forecasting report by the Insurance Information Institute (Triple-I) and collaborating partner, Milliman, the first-half economic and underwriting results for the US property and casualty (P&C) industry were better than expected.
The report, Insurance Economics and Underwriting Projections: A Forward View discloses that the net combined ratio (NCR) estimate of 99.4 improved by 2.3 points year-over-year, with commercial lines continuing to outperform personal lines.
Commercial lines 2024 NCR remained relatively flat at 97.1, this is despite improvement in commercial property, commercial multi-peril and workers’ compensation, commercial auto and general liability continued to deteriorate, explained the report.
Taking a look at personal auto NCR of 100 is 4.9 points better than 2023, while the 2024 NWP growth rate stands at 14.5% is the highest in over 15 years. Personal lines net written premium (NWP) growth is expected to continue to surpass commercial lines by nearly 9% points in 2024.
The report also highlights homeowners 2024 NCR of 104.9; a 6-point improvement over 2023, with profitability expected in 2026 and double-digit NWP growth of 10% expected in 2025.
Additionally, the Federal Reserve easing monetary policy by continuing to lower interest rates and the stability of geopolitical risks will be key to maintaining the performance growth trend.
Dale Porfilio, Chief Insurance Officer, Triple-I, commented: “The ongoing performance gap between personal and commercial lines remains, but that gap is closing. The significant rate increases necessary to offset inflationary pressures on losses are driving the improved results in personal auto and homeowners. With that said, the impact from natural catastrophes such as hurricanes Helene and Milton threaten the improved homeowners results and are a significant source of uncertainty.”
Jason B. Kurtz, principal and consulting actuary at Milliman elaborated on profitability concerns within commercial lines, adding: “Commercial auto expectations are worsening and continue to remain unprofitable through at least 2026. General liability has worsened and is expected to be unprofitable through 2026.”
Talking about the workers’ compensation line continuing its robust performance, Kurtz stated: “The expected 2024 net combined ratio of 88.8 would mark the 10th consecutive year of expected underwriting profitability. We continue to forecast favourable underwriting results through 2026.”
Donna Glenn, Chief Actuary, National Council on Compensation Insurance (NCCI), also revealed preliminary results based on the first half of 2024. She stated: “The workers’ compensation line is expected to have another strong year with continued underwriting gains in 2024, comparable to recent years, and a net premium volume similar to that observed in calendar year 2023.”
The decline in claim frequency, due to continuous emphasis on workplace safety, is cited as one of the factors driving these results.
Michel Léonard, Chief Economist and Data Scientist, Triple-I, notes the pace of increase in P&C replacement costs, which are expected to overtake overall inflation. He explains that after a few quarters of P&C replacement costs increasing less than the overall Consumer Price Index, Triple-I forecasts P&C costs to increase faster than overall inflation in 2025.
“P/C carriers benefited from a ‘grace period’ over a few quarters during which replacement costs were increasing at a slower pace than overall inflation. That won’t be the case in 2025,” Léonard concluded.
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