By Max Dorfman, Research Writer, Triple-I

Severe convective storm losses—the highest in decades—significantly affected the 2023 net combined ratio for the property/casualty industry, according to the latest underwriting projections by Triple-I and Milliman actuaries.

The 2023 net combined ratio is now forecast to be 103.8, with hard markets continuing the net written premium growth, forecast at 8.3 percent. Combined ratio is a standard measure of underwriting profitability, in which a result below 100 represents a profit and one above 100 represents a loss.

The quarterly report, Insurance Economics and Underwriting Objections: A Forward View, was presented on November 2 at a members only briefing moderated by Triple-I CEO Sean Kevelighan. Members can access the briefing replay by contacting members@iii.org for instructions.

Dale Porfilio, FCAS, MAAA, Chief Insurance Officer of Triple-I, discussed the overall P&C industry underwriting projections.

“We forecast personal lines to improve each year from 2023 through 2025, but still lag behind strong underwriting profitability in commercial lines,” he said. He also noted that the improvements are expected to result in “the overall P&C industry returning to a small underwriting profit in 2025.”

On personal auto, Porfilio forecast premium growth of 11.0 percent in 2023 as rate increases start to exceed loss trends, allowing the 2023 net combined ratio to improve incrementally to 110.5 from 112.2 in 2022. 

“Costlier replacement parts and low inventories are contributing to current and future loss pressures,” Porfilio said, adding, “unless replacement cost begins to decrease materially—which is not currently forecast—we project personal auto to remain at an underwriting loss through 2025.”

Looking at commercial property, the 2023 net combined ratio is forecast at 91.6, nearly identical to 2022. 

“Hard market conditions continue into 2023, most notably in catastrophe-prone regions,” said Jason Kurtz, a principal and consulting actuary at Milliman—an independent risk-management, benefits, and technology firm said. “We expect premium growth to moderate through 2025.”

Kurtz also discussed commercial auto, predicting that underwriting losses will continue, with first-half 2023 direct incurred loss ratios at the highest in at least 15 years.

“There will be a continued need for rate to improve the combined ratio results,” Kurtz said, adding, “We are forecasting the 2023 combined ratio at 106.7 percent, 2024 at 103.4 percent and 2025 at 102.7 percent.”

Michel Léonard, PhD, CBE, Chief Economist and Data Scientist at Triple-I, discussed key macroeconomic trends impacting the property/casualty industry results including inflation, increasing interest rates and overall economic underlying growth.

“P&C growth has improved in 2023, growing 1.3 percent versus 2.1 percent for overall 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 percent versus 1.7 percent in 2024 and by 4.5 percent versus 2.0 percent in 2025,” Léonard explained.

Léonard noted that top risk scenarios for 2024 include geopolitics, weaking employment, and GDP contraction. “The Fed may also keep increasing rates into 2025, pushing down home and auto insurance underlying economic growth.” 

Donna Glenn, Chief Actuary at the National Council on Compensation Insurance (NCCI), also shared preliminary numbers for 2023 on workers compensation premium, payroll, and underwriting profitability. She noted that premium increased 11 percent in 2022, returning to near the pre-pandemic levels of 2019. Glenn also indicated that the 2023 combined ratio should be very similar to 2022, resulting in a full decade of workers comp calendar-year combined ratios under 100 percent.

“All in all, the results for the first half of 2023 are remarkably stable,” she said. “I want to be clear—we continue to be vigilant in monitoring results and trends.”

Want to know more about the risk crisis and how insurers are working to address it? Check out Triple-I’s upcoming Town Hall, “Attacking the Risk Crisis,” which will be held Nov. 30 in Washington, D.C.