P/C Direct Premium Written Up 4.1% Through 3Q 2013
Direct premium written (DPW) for property/casualty insurance companies continues to increase.
At year-end 2012, more than $523 billion of DPW was reported, an all time high for the industry. For 2012, total DPW for all P/C insurers aggregately increased 4.4 percent over 2011, an increase of nearly $22.3 billion. Through the third quarter of 2013, this growth trend has continued, as DPW for all P/C insurers aggregately increased 4.1 percent over third quarter 2012.
For the nine months ending Sept. 30, 2013, P/C companies comprising the Top 25 insurers in terms of DPW growth leveraged their experience and increased DPW nearly 14 percent over 2012. This continues the Top 25 insurers’ impressive display of premium growth and financial stability. The Top 25 accounted for nearly 61 percent of the growth in the P/C insurance industry’s DPW. In contrast, the remainder of the industry reported an increase in DPW of only 2 percent year-over-year.
In examining DPW further, P/C companies reported an aggregate increase in DPW through third quarter 2013 of 12.5 percent over third quarter 2010. Moreover, while increasing DPW, P/C companies have aggregately maintained a sufficient level of policyholders’ surplus (PHS). This is demonstrated by the $45 billion P/C insurers added to PHS since third quarter 2012.
One measure that indicates P/C companies are conservatively leveraged is the DPW to PHS ratio. An insurer’s DPW to PHS ratio is indicative of its premium leverage on a direct basis, without consideration for the effect of reinsurance. Through third quarter 2013, this ratio (estimated for a full year) is 69.7 percent for P/C companies as a whole. Since 2010, this ratio for P/C companies has remained stable at around 70 percent.
Although the market continues to exhibit signs of firming and DPW continues to increase, P/C insurers should not expect a traditional hard market in the near future. After reviewing current results, it is more realistic to expect gradual, stable growth.
