Navigating the Future of P/C Insurance: Insights and Predictions

Underwriting Profitability in the U.S. P/C Insurance Industry

The U.S. property/casualty (P/C) insurance industry is expected to face underwriting challenges due to poor personal lines performance, according to Triple-I's chief insurance officer, Dale Porfilio. The industry's combined ratio, a key measure of underwriting profitability, is forecasted to end 2023 at 102.2, nearly matching the 2022 result of 102.4. Despite this, Porfilio predicts an incremental improvement in net combined ratios each year from 2023 to 2025, with the industry returning to a small underwriting profit by 2025.

Impact of Macroeconomic Trends on P/C Industry

Michel Léonard, Triple-I's chief economist, discussed how macroeconomic trends such as inflation and rising interest rates are impacting the P/C industry. He noted that U.S. CPI is likely to stay in the mid-to-upper 3 percent range through the end of the year. This inflationary pressure, combined with supply chain disruptions easing, has led to a deceleration in replacement cost increases, returning to pre-COVID trends. Despite these challenges, Léonard expects U.S. GDP to avoid a technical recession in 2023, although it may decrease on a quarterly basis in the second half of the year.

Commercial Lines and Workers Compensation Outlook

On the commercial side, Jason B. Kurtz from Milliman highlighted that while commercial lines experienced underwriting gains in 2022, commercial auto saw a return to underwriting losses with a net combined ratio of 105.4. In contrast, workers compensation stands out as the brightest spot among major P/C product lines, with strong underwriting profitability forecasted to continue through 2025. Donna Glenn from the National Council on Compensation Insurance noted that despite higher severity in 2022, the workers compensation system remains healthy due to a long-term negative trend in overall frequency and moderate medical severity.

For readers, it's crucial to stay informed about these trends and predictions to better navigate the evolving landscape of P/C insurance. Keeping an eye on macroeconomic indicators and understanding the specific dynamics of different insurance lines can help in making informed decisions.