Navigating the Complex Landscape of Property/Casualty Insurance: Insights from Triple-I and Milliman

Inflation and Loss Pressures: A Persistent Challenge

The latest underwriting projections for property/casualty (P&C) insurance lines by actuaries at the Triple-I and Milliman reveal a continued strain on the industry. The 2021 combined ratio worsened by 0.8 points from 2020, primarily due to deteriorations in personal auto and workers compensation lines. Michel Léonard, Chief Economist at Triple-I, highlighted that the industry's performance is constrained by historically high inflation, with average replacement costs for P&C lines at 16.3 percent, nearly double the U.S. average CPI of 8.5 percent. While the Federal Reserve forecasts inflation slowing to 4.3 percent by year-end, Triple-I anticipates a longer transition period.

Catastrophe Losses and Market Dynamics

Dale Porfilio, Chief Insurance Officer at Triple-I, noted that 2021 had the worst full-year catastrophe losses since 2017, with homeowners bearing over 60 percent of the insured losses. Hurricane Ida was the most significant single event, contributing to the overall catastrophe losses. Despite these challenges, premium growth is expected to continue through 2024 due to the hard market, with the net expense ratio at 27.0 points being the lowest in more than a decade.

Commercial Lines and Future Projections

On the commercial side, Jason Kurtz from Milliman reported improvements in the commercial multi-peril line, with a 3.6-point improvement in the combined ratio from 2020. However, underwriting results are expected to be adversely impacted by inflation and catastrophe loss pressures. Workers compensation, despite being profitable, saw shrinking margins in 2021 and is projected to continue through 2024. For personal auto and homeowners lines, underwriting losses in 2021 necessitate rate increases to restore profitability, a process projected to take at least two more years.