Navigating the Impact of COVID-19 on the Property/Casualty Insurance Industry

The Largest-Ever Drop in Surplus

The surplus for the private U.S. property/casualty insurance industry experienced its largest-ever quarterly decline in the first quarter of 2020, dropping by $75.9 billion. This significant drop was largely driven by a decline in the valuations of insurers' investments as the stock market faced a major downturn. The surplus fell to $771.9 billion as of March 31, 2020, from the record-high $847.8 billion at the end of 2019. Despite this, traditional leverage ratios remained below their long-term averages, indicating a relatively stable financial position.

Steady Underwriting Results Amidst Pandemic

Despite the financial challenges, other industry results remained steady or improved from the previous year. Net income after taxes in the first quarter of 2020 was $17.9 billion, essentially the same as in the first quarter of 2019. The net underwriting gain in the first quarter was $6.3 billion, a 19.9% increase from the previous year. Net written premiums also increased to $164.4 billion in the first quarter of 2020 from $154.7 billion in the first quarter of 2019—a 6.2% increase. These figures suggest that while the industry faced significant financial headwinds, it also demonstrated resilience and adaptability.

Future Challenges and Adaptations

The COVID-19 pandemic and associated economic disruptions have had a profound impact on the insurance industry, with significant changes expected in insured exposures and the amount and mix of claims. Verisk research estimates that personal auto insurers have offered more than $13 billion in policyholder rebates and credits. MarketStance, a Verisk solution, estimates that at least 1 million insured businesses in the United States will fail in 2020, and direct written premiums in commercial lines will decrease 2.8%. These projections highlight the ongoing challenges insurers face as they navigate the complexities of the post-pandemic world.

For readers, it is crucial to stay informed about the evolving landscape of the insurance industry. Keeping up with regulatory changes, understanding the impact of economic disruptions on premiums and claims, and being aware of new products and strategies being developed by insurers can help consumers and businesses make more informed decisions. Additionally, considering the potential long-term effects of the pandemic on insurance policies and coverage can provide a more comprehensive understanding of one's insurance needs.