Severe Convective Storms: A Major Threat to P&C Industry Growth

Severe Convective Storms Drive Adverse Underwriting Results

Severe convective storm losses have significantly impacted the property/casualty (P&C) industry's underwriting profitability in 2023, according to the latest projections by actuaries at the Triple-I and Milliman. The quarterly report, Insurance Economics and Underwriting Projections: A Forward View, presented on January 30, forecasts an overall combined ratio of 103.9 for the industry, with commercial lines at 97.7 and personal lines at 109.9. This indicates a loss for the industry as a whole, with personal lines performing particularly poorly.

Hard Markets and Premium Growth

Despite the challenging environment, the P&C industry continues to experience hard markets, with net written premium growth forecast at 9.0 percent for 2023. Dale Porfilio, Chief Insurance Officer at Triple-I, highlighted that the incurred loss ratio for homeowners, commercial auto, and commercial multi-peril exceeded expectations, with the net combined ratio for homeowners forecast at 112.3, the worst since 2011. This reflects the need for rate increases to offset inflationary loss costs, with a net written premium growth rate of 12.4 percent, the highest in over 10 years.

Projections and Economic Trends

Looking ahead, the industry expects personal auto and homeowners lines to improve in 2024 and 2025 but to remain unprofitable. Jason Kurtz, a Principal and Consulting Actuary at Milliman, noted that commercial property and workers compensation continue to be profitable, while commercial multi-peril and commercial auto remain troubled. Michel Léonard, Chief Economist at Triple-I, discussed key macroeconomic trends, including inflation, interest rates, and overall economic growth, which are impacting the P&C industry. Despite real GDP growth accelerating to 4.9 percent in Q3 2023, economists expect year-over-year growth of 2.1 percent, with P&C underlying growth forecast at 2.6 percent in 2024.

For readers, it's crucial to stay informed about these trends and projections, as they can impact insurance premiums and coverage options. Keeping an eye on economic indicators and industry reports can help in making informed decisions about insurance policies.