Premium growth is up for North American P&C Re/Insurers

Premium growth is up substantially for North American P&C insurers overall, though struggles continue for two notable segments, according to Fitch Ratings’ review of GAAP results for 40 North American reinsurers.

The aggregate group combined ratio increased by 1.4 percentage points to 96.8% versus 95.4% in 2021, while GAAP operating return on equity improved to 8.5% in 2022.

One notable outlier was the personal auto business. Historically one of the largest and more stable lines of business, results proved volatile, according to Director Christopher Grimes.

Personal lines performance deteriorated sharply, led by rising inflation, accelerating loss-cost trends in personal auto, and above average insured catastrophe losses

Director Christopher Grimes

While specialty commercial and (re)insurers produced the strongest improvement in operating results last year, Florida specialists stumbled again.

Florida homeowners insurers reported a considerable operating loss as losses from Hurricane Ian exacerbated an already-challenged environment.

Property specialists in this market will face challenges tied to reduced availability and higher costs for reinsurance coverage in the near term. Further market exits remain a distinct possibility in 2023

Recent legislative and regulatory actions enacted in Florida will support a reduction in future property insurance loss costs (see Rough Year for Many US Auto, Property and Casualty Insurers).

Sharply rising interest rates and widening of spreads drove the significant decline in unrealized positions of fixed-income portfolios across the group, driving a 13.3% decline in common shareholders’ equity.

The overall group entered the year with an aggregate unrealized bond gain position of $38 billion, before experiencing a $117 billion decline in unrealized bond values to a $79 billion unrealized loss at YE 2022.

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

by Yana Keller