A.M. Best said the property and casualty insurance industry posted a second straight underwriting loss in 2017. That loss is up significantly from the small loss the year before. The statement comes from Best’s Market Segment Report U.S. Property/Casualty 2018 Review & Preview.
Driven by catastrophe losses, the net underwriting loss is $29.3 billion. That’s way up from the $6.5 billion loss in 2016. That caused the pre-tax operating income to drop a significant $14.8 billion when compared to 2016’s income of $41.1 billion.
The final 2017 combined ratio is predicted to drop to 105.1 from last year’s 100.9.
And if that wasn’t bad enough news, the pre-tax return on revenue is expected to drop considerably as well. Look for a figure of about negative 2.7% compared to a gain of 7.8% in 2016.
There is good news in the report. It says higher than expected capital gains and lower tax incomes — which are driven in part by underwriting loss — will be beneficial to net income. However, net income fell 37.7% to $26.3 billion from $42.2 billion last year.
Surplus jumped 2.5% in 2017 and that’s down from 4.3% a year ago. It is the second lowest growth of the last five years. Surplus growth — Best projects — will be about 2% this year. That will be because of predicted lower underwriting losses and modest growth in investment income.
A.M. Best thinks rate increases will stay in the low single digits again in 2018 and will do so throughout the country. Property line rates will largely depend on exposure to catastrophe. Commercial and personal auto liability could sit in the mid-single digits. Prior year losses are the reason.
Personal lines will remain stable.
The 2018 predictions of A.M. Best are — so far — off to a positive start. Most commercial insurance lines rates sat in positive territory in January. Workers’ compensation is the only line that saw declines and they are down 1%. That’s a big improvement from December’s drop of 2.9%.
• Commercial auto — jumped 4.3%
• General liability — up 2%
• Umbrella — rose 1.3%
• Commercial property — increased 3%
• BOP — up 3.9%
Source links: Insurance Journal, Business Insurance, Carrier Management