The US property and casualty (P&C) insurance sector is poised for a notable turnaround in its financial performance in 2024, with optimistic projections extending into 2025. This positive outlook comes despite an anticipated net underwriting loss of $2.6 billion for 2024, as highlighted in a recent report by AM Best.
AM Best attributes a portion of this improvement to the rising interest rates, which have significantly enhanced investment yields for insurers, thus helping to mitigate the impact of weather-related losses. The report reveals that in 2023, the US P&C insurance industry faced an underwriting loss of $24.6 billion, which was counterbalanced by net investment income amounting to $72.4 billion.
Looking ahead, while underwriting losses are projected to decline in 2024, AM Best estimates that the industry’s total net investment income will increase to $85.4 billion, with expectations to reach an impressive $100.8 billion by 2025. This growth is bolstered by robust underwriting results in commercial lines, which have benefited from positive rate momentum across most business segments. Additionally, personal lines have seen enhancements attributed to effective pricing strategies, improved claims handling, and better risk assessment practices.
In 2024, the personal auto and homeowners insurance lines are expected to conclude the year with an estimated combined ratio of 101%, marking a significant improvement compared to 2023, when personal lines reported a ratio exceeding 107%. Greg Williams, Managing Director at AM Best, noted, “On a net basis, both the homeowners multiperil and private passenger auto sectors have demonstrated more favorable loss ratios by year-end, reflecting a vigorous effort for rate adequacy among primary personal lines insurers since early 2022.”
Furthermore, AM Best anticipates a 7.3% increase in net premiums written for the P&C industry in 2025, succeeding an estimated 10% growth in 2024. Personal lines are projected to have experienced a remarkable 12.9% growth in net premiums in 2024, with a subsequent 9% rise expected in 2025. Williams added, “Insurers are more determined than ever to secure the rate increases necessary to meet their calculated rate needs, particularly for critical coverage lines such as private passenger auto and homeowners multiperil.”
Source: Reinsurance News
