The 2023 net combined ratio for the property & casualty insurance industry is forecast to be 104%.
Hard insurance markets continue with 2023 net written premium growth forecast at 8.3%.
According to Insurance Information Institute report, the projection is worse than the 102.2% combined ratio predicted earlier this year, which is, in part, due to severe convective storm losses being the highest in decades.
Triple-I discussed key macroeconomic trends impacting the p&c insurance industry results, and identified the top risk scenarios for 2024.
Increases in p&c replacement costs should continue to slow down faster than overall inflation over the next three years. However, it will take 10 years of normal inflation for insurance replacement costs to process pandemic-related increases.
The Fed may also keep increasing rates into 2025, pushing down home and auto insurance underlying economic growth
Michel Léonard, Chief economist and data scientist Insurance Information Institute
P&C insurance replacement costs in 2020-2023 increased an average of 45%, while inflation for the overall U.S. economy increased 15% within that same period.
The improvements are expected to result in the overall p&c industry returning to a small underwriting profit in 2025.
In personal auto, Insurance Information Institute forecasts premium growth of 11% in 2023 as rate increases start to exceed loss trends, allowing the 2023 net combined ratio to improve incrementally to 110.5% from 112.2% in 2022.
We forecast personal lines to improve each year from 2023 through 2025, but still lag behind strong underwriting profitability in commercial lines
Dale Porfilio, Chief insurance officer Insurance Information Institute
Costlier replacement parts and low inventories are contributing to current and future loss pressures. Unless replacement cost begins to decrease materially, analytics project personal auto to remain at an underwriting loss through 2025.
Catastrophe losses in the H1 of 2023 were elevated and that approximately 70% of those losses were in the homeowners line. For 2023, the net combined ratio is forecast at 110.9%, 6.2 pts worse than 2022.
Commercial property, general liability, and workers compensation continued to be bright spots for the industry, while commercial auto continues to be troubled.
For commercial property, the 2023 net combined ratio is forecast at 91.6, nearly identical to 2022. Hard market conditions continue into 2023, most notably in catastrophe-prone regions.
For commercial auto, underwriting losses continue. Direct incurred loss ratios in the 1H of 2023 were at the highest in at least 15 years.
There will be a continued need for rate to improve the combined ratio results. Milliman are forecasting the 2023 combined ratio at 106.7%, 2024 at 103.4% and 2025 at 102.7%.
The general liability 2023 net combined ratio forecast of 96.9% falls between 2021 and 2022 actual results. Insurance premium growth is forecast to moderate in 2023-2025 as a result of the recent improved underwriting performance and lower GDP growth expectations.
2023 net combined ratio forecast of 90.6% continues the string of underwriting profits. Favorable results are forecast to continue through 2025, with premium growth 2.7% for 2023, 1.9% for 2024 and 1.9% for 2025.
by Yana Keller
