The property and casualty insurance industry’s combined ratio – an indicator of underwriting profitability – is forecast at 100.7 for 2022, up 1.2 points from 2021, according to actuaries at risk-management, benefits and technology firms, Triple-1 and Milliman. They presented their findings in a Triple-1 members-only virtual webinar.
The composite ratio shows the difference between claims and expenses paid and premiums collected by insurance companies. A composite ratio below 100 represents an underwriting profit and a ratio above 100 represents a loss. The industry was barely profitable in 2021, with a combined ratio of 99.5.
Personal auto lines suffered losses due to significant deterioration. The 2022 net combined ratio for personal auto is forecast to be 105.2 – 3.8 points higher than 2021, driven primarily by a significant deterioration in auto physical loss coverage, said Del Porfilio, chief insurance officer at Triple-1.
In most product lines, inflation, supply-chain disruptions and geopolitical risks are expected to keep insured losses and premium rates under upward pressure.
“We forecast 2022 P&C premium growth of 8.5 percent,” Porfilio said. “This is lower than the 9.2 percent growth in 2021, but still strong due to a tighter market.”
Dr. Michelle Leonard, Triple-1’s Chief Economist and Data Scientist, discussed key macroeconomic trends affecting property/contingent industry results. He noted that insurance growth remains constrained by economic fundamentals, with replacement-costs rising above pre-COVID levels and sub-par underlying growth.
Milliman Principal and Consulting Actuary Jason B. Another year of underwriting losses for commercial multi-peril lines is likely, Kurtz said.
“Further rate hikes are needed to offset damaging economic and social inflationary pressures,” Kurtz said. “Social inflation” refers to the impact of litigation costs on insurers’ claim payouts, loss ratios and, ultimately, how much policyholders pay for coverage.
Underwriting the workers’ compensation line is expected to continue to be a multi-year portion of profits, though margins are likely to decline further through 2024, Kurtz said.
Dave Moore, president of Moore Actuarial Consulting, said the 2022 combined ratio for commercial autos is forecast to be 101.4 percent.
“We are forecasting underwriting losses for 2022 to 2024 due to prior-year growth and the impact of inflation — both social inflation and economic inflation,” Moore said.