Navigating the Future: Property/Casualty Insurance Outlook for 2021 and Beyond

Steady Underwriting Profits Projected for 2021

Property/casualty insurers are expected to maintain their underwriting profits in 2021, according to a forecast jointly released by the Insurance Information Institute (Triple-I) and Milliman. The forecast anticipates a combined ratio of 99 for 2021, mirroring the previous year's performance. This projection was unveiled during a members-only virtual webinar, 'Triple-I /Milliman Underwriting Projections: A Look Ahead,' moderated by Triple-I CEO Sean Kevelighan. Early indications for 2022 and 2023 suggest a similar trend. The combined ratio, which represents the percentage of each premium dollar spent on claims and expenses, is a critical metric in the insurance industry.

Premium Growth and Economic Recovery

Premiums are forecasted to surge by 7.1 percent in 2021, a significant increase from the 2.5 percent growth in 2020. This surge is attributed to both economic recovery and a hardening market, where insurance becomes more expensive and scarce. A hard market typically occurs during economic downturns or periods of high demand. Despite the projected premium growth, the forecast also predicts a slowdown in premium growth to above 5 percent in both 2022 and 2023.

Natural Catastrophes and Market Dynamics

The year 2021 started with significant natural catastrophe events, such as the Texas freeze in Q1, which resulted in an estimated $15 billion in losses. James Lynch, Triple-I's senior vice president and chief actuary, noted that such large losses in Q1 are unusual. Additionally, the ongoing drought in the West poses a continued threat as wildfire season approaches. Despite these challenges, underwriting results are expected to gradually improve starting in 2022, as the economy recovers and more people return to work.

In conclusion, while the insurance industry faces challenges from natural catastrophes and market dynamics, the overall outlook for 2021 remains positive with steady underwriting profits and premium growth. For insurance practitioners, focusing on sector-specific growth and the upward trend in interest rates could provide additional insights and opportunities.