Q3 Combined Ratio for U.S. P/C Industry Highest in 5 Years

The U.S. property/casualty industry posted a combined ratio of about 106.6 in the third quarter — the highest in five years, according to an analysis by S&P Global Market Intelligence.

“In addition to the effects of catastrophe losses on various property insurance business lines, including private auto physical damage coverages, elevated costs to repair and replace vehicles along with elongated times to close auto insurance claims continued to weigh on the industry,” wrote Tim Zawacki, principal insurance analyst.

“Current and prior accident years felt the impact of inflation, our analysis finds.”

The industry’s combined ratio has not been this high since 2017 when hurricanes Harvey, Irma and Maria made landfall. The estimated Q3 result of 106.6 is above the 103.7 combined ratio from Q2 2022 and 104.5 from Q3 2021. Additionally, according to S&P, the industry’s estimated underwriting loss for Q3 is $15 billion — a 20-quarter high.

S&P Global Market Intelligence said the private auto business generated a direct incurred loss ratio of 84.7 in the third quarter, including results of 80.7 for the private auto liability lines and a staggering 90.4 in the private auto physical damage business.

Comprehensive claims related to Hurricane Ian factored in third-quarter private auto physical damage losses. Although the data does not provide a breakout of catastrophe claims, private auto physical damage incurred losses in the third quarter came in approximately $2.3 billion higher than they would have been had the business run at a loss ratio in line with the second quarter.

Looking at private auto liability, results were impacted by an increase in frequency, higher medical costs and more litigated claims. S&P said the Q3 loss ratio ranks as the second-highest in the last 21 years.

“The data reinforces the urgency the industry has already been displaying around the implementation of rate increases on private auto business,” Zawacki said. “It also speaks to the considerable volatility that catastrophe losses continue to inject into quarterly results even after accounting for significant reinsurance coverage for hurricanes.”