AM Best says US personal lines premiums will rise 10% this year after a 12% jump last year, with insurers “willing to withdraw from a given state entirely if necessary increases are not approved”. 

The ratings agency forecasts a 9% rise in net premium written for the US property and casualty (P&C) industry this year, following an estimated 11.4% increase last year. 

A “solid rebound” is in store for the industry, including improved underwriting and operating results, helped by commercial lines’ continued profitability, improvements in personal lines and stronger investment returns. 

Last year, severe weather-related losses, inflation and reinsurance price rises drove the US P&C sector’s net underwriting loss to a 10-year high of $US38 billion ($58.13 billion). 

“Commercial lines insurers continued to reap the benefits of up-pricing and effective risk selection, but overall results were overshadowed by weather and further deterioration in personal lines,” AM Best said. 

However, the industry posted a sizeable profit due to investment income, as a bull market run in the second half “masked” the underwriting losses. 

Personal motor and homeowner lines ended the year with an estimated combined operating ratio of 110%, while commercial lines had another strong year at 97.1%.  

Overall, the P&C industry finished the year with an estimated combined operating ratio of 103.7%. This year, AM Best expects that to improve to 100.7%. 

The agency estimates catastrophe losses totalled $US65 billion ($100 billion) last year, mostly from secondary perils amid a record 28 single events of more than $US1 billion ($1.54 billion) in losses. 

Personal lines insurers’ efforts to pursue rate increases have been hit by regulatory constraints, inflationary pressures and more frequent and severe weather-related events. 

For three consecutive years, the private passenger motor segment has posted net underwriting losses. 

AM Best says a “fundamental shift” in reinsurance behaviour and risk appetites has placed more of the risk burden on primary carriers. It does not expect reinsurance underwriting conditions to ease significantly this year, because while last year was robust, it followed a multiyear period in which reinsurer returns lagged their required costs of capital. 

See the report here.