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P/C Insurers’ Net Income for 9 Months Fell 27% on Effects of Catastrophes

2021-02-09 14:36:00

In the first nine months of 2020, net income for the U.S. property / casualty insurance industry declined 27.5% to $ 35.1 billion and net underwriting profits fell to $ 0.3 billion from $ 5.4 billion a year earlier when the sector dealt with the effects of the COVID sector. 19 pandemic and a historic catastrophe season.

According to a report by data firm Verisk and the American Property Casualty Insurance Association (APCIA), the deterioration in underwriting results was due in part to losses and loss adjustment costs from disasters, which more than doubled to $ 47 in nine months. 1 billion. months 2020 from $ 21.5 billion in the same nine-month period a year earlier.

Verisk's PCS reported that 2020 has set a record for the number of catastrophic events in the US. The 2020 disasters included 19 events with at least $ 1 billion in direct insured losses in the United States (17 in the first nine months), including the first riot and civil disorder to exceed that threshold.

The US also recorded one of the biggest deteriorations on the Verisk Maplecroft Civil Unrest Index in the past year – from the 91st riskiest jurisdiction in the second quarter of 2020 to the 34th. The index assesses the risk of business disruption due to civil unrest and covers a spectrum of incidents from protests to violent mass demonstrations and riots.

Auto insurers

Auto insurers benefited from the reduced driving activity due to the pandemic during the first nine months of 2020, with the net loss ratio for auto insurance improving from 65% to 56.6% compared to the same period last year. Many auto insurers have partially refunded current policyholders and adjusted their rates. Verisk's ISO estimates that insurers have provided approximately $ 11 billion in direct premium refunds and renewal credits to policyholders.

According to Verisk, the effect of future interest rate changes driven in part by COVID-19 cannot be reliably estimated.

Source: Verisk / APCIA

Policyholder surplus increased by $ 16 billion to $ 863.3 billion at September 30, 2020 from $ 847.3 billion at December 31, 2019, driven by growth in the stock market.

The report said that while it may take time for insured losses directly attributable to the pandemic to be reliably estimated, the impact on premiums was immediate. Due to the economic disruption, consumers and businesses have postponed and canceled large purchases and capital investment, leading to reduced premium activity. Written direct premium growth slowed to 2.3% in the first nine months of 2020, from 4.8% in the same period in 2019.

Robert Gordon, APCIA senior vice president, policy, research and international, said analysts expect commercial line insurers to experience significant premium reductions as a result of audits reflecting reduced earnings and payrolls.

"The industry is still facing strong headwinds from unknown but potentially serious future COVID-19-related losses and long-term claims," ​​said Gordon.

The COVID-19 vaccines should aid the economic recovery in the future, but many questions remain.

"The beginning of vaccination efforts with COVID-19 has given people in the United States and around the world some hope," said Neil Spector, president of ISO at Verisk. "But the US economy and insurance industry still face many challenges that will depend on our progress in ending the pandemic."

“How long does it take to vaccinate the majority of the population? What impact will new types of the disease have on its spread? How will businesses in need of large personal crowds survive? Which of the pandemic-driven changes are permanent? All of these questions will have a major impact on the types of insurance and services customers expect, ”adds Spector.

Third quarter results

After tax, insurers' net income fell to $ 10.9 billion in the third quarter of 2020 from $ 15.4 billion in the third quarter of 2019, and their combined ratio deteriorated from 98.8% in the same period a year earlier to 101.3% in the third quarter of 2020.

Net written premiums increased $ 5.0 billion, or 3.0%, to $ 171.3 billion in the third quarter of 2020 from $ 166.2 billion in the third quarter of 2019. Net earned premiums increased by 2 , 3% to $ 162.9 billion in the third quarter of 2020, from $ 159.2 billion in the third quarter year earlier.

Results from insurers reporting their fourth quarter performance so far – including Travelers, Chubb, Allstate, The Hartford and W.R. Berkley – suggest the P / C industry could end the year strong.


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