P&C industry net combined ratio forecast at 103.8% for 2023: Triple-I and Milliman - Reinsurance News (2024)

The 2023 net combined ratio for the property/casualty industry is forecasted to be 103.8%,driven in part by severe convective storm losses being the highest in decades, according to a report by Triple-I and Milliman.

While the sector’s combined ratio is expected to be end the year in unprofitable territory, hard markets persist and 2023 net written premium growth is forecast at 8.3% for the industry.

Michel Léonard, Ph.D., CBE, Chief Economist and Data Scientist at Triple-I, discussed key macroeconomic trends impacting the P&C industry results.

“P/C growth has improved in 2023, growing 1.3% versus 2.1% for overall gross domestic product (GDP). While many hurdles could derail such improvements, P&C underlying economic growth is currently positioned to increase faster than overall GDP by 2.6% versus 1.7% in 2024 and by 4.5% versus 2.0% in 2025,” said Léonard.

He stressed that top risk scenarios for 2024 include geopolitics, weaking employment and gross domestic product (GDP) contraction. Further, the Fed may decide to keep rising rates into 2025, which Léonard says will push down home and auto insurance underlying economic growth.

P/C replacement costs are another growing cause for concern for the industry. Between 2020 and 2023, it increased by an average of 45% whereas inflation for the overall U.S. economy increased by 15% within that same period, explains the report.

“Increases in P/C replacement costs should continue to slow down faster than overall inflation over the next three years. However, it will take 10 years of normal inflation for insurance replacement costs to process pandemic-related increases,” said Léonard.

Commenting on the overall P&C industry underwriting projections, Dale Porfilio, FCAS, MAAA, Chief Insurance Officer at Triple-I, added: “We forecast personal lines to improve each year from 2023 through 2025, but still lag behind strong underwriting profitability in commercial lines. The improvements are expected to result in “the overall P&C industry returning to a small underwriting profit in 2025.”

Jason B. Kurtz, FCAS, MAAA, a principal and consulting actuary at Milliman said that commercial property, general liability, and workers’ compensation continued to be bright spots for the industry. In contrast, commercial auto continues to be troubled.