Navigating the Road to P/C Underwriting Profitability: Insights and Projections

The Long Road to Profitability

The property/casualty (P/C) insurance industry is projected to achieve underwriting profitability in 2025, according to the latest research from the Triple-I and Milliman. The report, Insurance Economics and Underwriting Projections: A Forward View, presented at a members-only webinar on July 11, also forecasts a small underwriting loss in 2024.

Economic and Geopolitical Factors

Michel Léonard, Ph.D., CBE, chief economist and data scientist at Triple-I, discussed how P/C replacement costs continue to increase more slowly than overall inflation. He highlighted that U.S. economic growth slowed more than expected in Q1 2024 due to the Fed's lack of clarity about interest rate cuts. Additionally, global supply chains are showing stress due to ongoing geopolitical risks, potentially pushing inflation back toward pandemic-era levels.

Line-Specific Performance and Regulatory Impact

Dale Porfilio, FCAS, MAAA, Triple-I's chief insurance officer, noted the performance gap between personal and commercial lines is closing. Personal lines have faced regulatory scrutiny, limiting insurers' ability to increase prices to reflect inflation. Jason B. Kurtz, FCAS, MAAA, a principal and consulting actuary at Milliman, pointed out that commercial multi-peril continues to face long-term challenges, while workers' compensation remains robust. Donna Glenn, FCAS, MAAA, chief actuary at NCCI, added that medical costs in workers' compensation have grown moderately compared to the broader economy.

In conclusion, while the path to P/C underwriting profitability is challenging, understanding economic trends, geopolitical risks, and regulatory impacts can help insurers navigate these complexities. Staying informed about industry reports and forecasts can provide valuable insights for strategic planning.