P/C Industry Posts $4.7B Net Underwriting Loss in 2016

Private U.S. property/casualty insurers lost big in 2016, reporting a $4.7 billion net underwriting loss driven, in part, by higher catastrophe-related property losses, according to ISO and the Property Casualty Insurers Association of America.

The results stand in sharp contrast to the $8.9 billion net underwriting gain insurers reported for 2015. Adding to sobering results, insurers saw a 25 percent drop in 2016 after-tax net income: $42.6 billion, versus $56.8 billion the previous year. Insurers’ combined ratio also deteriorated to 100.7 in 2016, versus 97.8 in 2015. The result comes with direct insured property losses in the U.S. hitting $21.6 billion in 2016, versus $15.2 billion in 2015. The number is also above the $19.2 billion average direct catastrophe loss over the last decade.

Beth Fitzgerald, president of ISO solutions, said in prepared remarks that insurers need to use detailed and accurate analytics of weather and environmental perils to underwrite catastrophic risk better. But they’re also hampered by legacy losses, she said, which underscores the need to focus on disciplined underwriting.

Robert Gordon, PCI’s senior vice president for Policy Development and Research, noted most operating results in 2016 hovered near long-term trend lines, though there has been deterioration in nearly every category since 2013.

Here are other numbers from the PCI/ISO report:

• Net investment income for 2016 came in at $46.3 billion, compared to $47.2 billion in 2015.
• Commercial lines direct premiums in 2016 grew to $258.6 billion — 3.1 percent higher than the previous year.
• In the 2016 fourth quarter, insurers’ after tax net income fell to $10.8 billion from $12.7 billion in the 2015 fourth quarter.
• The 2016 fourth quarter combined ratio hit 104.1, up from 100.4 in the 2015 fourth quarter.
• 2016 fourth-quarter net written premiums rose to $124.4 billion — 2.4 percent higher than the 2015 fourth quarter.
• Insurers booked a $700.9 billion industry surplus in 2016, compared with $674.2 billion at the end of 2015, and $688.3 billion in the previous quarter.

The figures are consolidated estimates based on reports accounting for at least 96 percent of all business written by U.S. property/casualty insurers.