1H2023 results for North American (re)insurers reveals strong premium growth at 11%

A rough first half for personal auto lines skewed overall solid results for U.S. P&C insurers overall with broad improvement in results likely delayed until 2024, according to Fitch Ratings review.

Fitch’s review of 1H2023 GAAP results for 40 North American (re)insurers reveals strong written premium growth at 11%, much of which came from reinsurers, specialty commercial underwriters and Florida homeowners’ specialists.

Countering the strong rate of growth was continued adverse loss trends experienced by personal auto insurers. Characteristically one of the largest and more stable lines of business, most personal auto insurers saw significant underwriting losses in 1H2023.

Fitch holds a ‘neutral’ sector outlook for the U.S. P&C insurance for this year. Sharp pricing changes in personal lines point to better sector underwriting results in 2024 from uncharacteristic recent volatility.

Chris Grimes, Senior Director Fitch

Higher costs of settling bodily injury claims and rising used vehicle and parts prices, labor rates and length of claim resolution, drove higher reserve revisions than historically experienced in the relatively stable business

Chris Grimes, Senior Director Fitch

In addition to higher than anticipated severity on prior-year claims, reserve adjustments related to recent tort reform legislation passed in Florida were identified as drivers of the adverse development.

The stable liability profile and strong liquidity position of North American life insurers should mitigate near-term challenges associated with rapidly rising interest rates. Insurers face interest rate-related declines in bond values and shareholders’ equity, reductions in assets under management and fee income, and lower variable investment income.

However, higher interest rates over a prolonged period are broadly positive for the life insurance industry as investment yields improve.

Commercial insurance underwriting profits may subside as pricing moderates amid uncertain loss-cost trends. Reinsurers profit potential has improved with recent market condition shifts.

Conversely, signs that underwriting performance is adversely affected by pricing that is not keeping pace with inflation, or reserve adequacy is materially compromised from previous pricing, could prompt Fitch to shift the sector outlook to ‘deteriorating’.

Fitch currently holds a neutral fundamental sector outlook for the U.S. P&C insurance sector in 2023-2024.

Sharp pricing changes in personal lines point to better sector underwriting results in 2023 from uncharacteristic recent volatility.

Fitch could move the sector outlook to ‘deteriorating’ if underwriting performance is adversely affected by pricing that does not keeping pace with inflation, or reserve adequacy is materially compromised.

Yana Keller  Edited by Yana Keller