Due to multiple catastrophes during the first nine months of 2017, property/casualty insurers saw profits plummet, according to the latest Verisk report on the state of the industry.
Even so, P/C insurers are doing well, said Beth Fitzgerald, senior vice president, Industry Engagement, ISO, a Verisk business. During an interview with Claims Journal, she outlined industry financial results for the first nine months of 2017 and explained how additional cat losses could impact how the year will turn out.
According to the latest Verisk state of the industry report, produced on a quarterly basis, in the first nine months of 2017 P/C insurers saw net income drop $35 billion. Loss and loss adjusting expenses (LAE) rose significantly to 11.3 percent in the first nine months in 2017, exceeding 7.6 percent recorded for the same period a year prior.
“The increases were driven by catastrophe losses,” Fitzgerald explained, citing hurricanes Harvey, Irma and Maria that impacted the U.S. in the third quarter.
Fitzgerald said net written premium growth rebounded to 4.1 percent, compared to 2.8 percent a year prior.
Net underwriting losses reached $20.9 billion, far exceeding the $1.7 billion underwriting losses during the same period in 2016.
Details by business segment indicate personal lines net written premium increased 6.6 percent, higher than in 2016 and significantly higher than other segments. Personal lines combined ratio improved slightly to 102.8 percent.
Commercial lines net written premium growth increased 1.8 percent, recovering from 2016 figures.
“The segment’s combined ratio worsened 10.3 percentage points to 106.2 percent in nine months 2017 and became the highest in all segments,” she said.
A large share of losses due to Harvey and Maria impacted commercial lines, including business interruption claims. ISO estimated catastrophe losses and LAE increased by $19 billion, up to $37.8 billion from $18.8 billion a year ago.
Bottom line, according to Fitzgerald, is that catastrophes are to blame for the significant impact on results seen in 2017.
“If not for the catastrophes, the combined ratio would have changed very little from last year,” she said.
Fitzgerald said additional losses are expected to impact the financial results for the rest of 2017.Besides the catastrophe-related losses due to the devastating wildfires in California, additional claims are expected from Harvey, Irma and Maria.
“It takes time for claims to be filed and processed, especially those related to business income losses following a catastrophe,” she said. “Most likely the full year 2017 will show the worst underwriting losses since $36.2 billion were reported in 2011.”
Despite record losses, investment income and capital gains pushed industry surplus to a new all-time high, she said, up to $719.4 billion, an $18.6 billion increase over 2016.
“The strength of the industry surplus means it is well positioned to provide the insurance protection for the public and to support the needs of the growing economy,” Fitzgerald said.
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