CORRECTING and REPLACING Best’s Market Segment Report: Secondary Peril Events Persist as U.S. Property/Casualty Sector Pushes Toward Rate Adequacy

Second paragraph, first sentence of release should read: The annual Review & Preview Best’s Market Segment Report notes that the U.S. P/C insurance industry recorded an underwriting loss of $24.6 billion in 2023, which was offset by net investment income of $72.4 billion. (instead of $24.6 million).

The updated release reads:

BEST’S MARKET SEGMENT REPORT: SECONDARY PERIL EVENTS PERSIST AS U.S. PROPERTY/CASUALTY SECTOR PUSHES TOWARD RATE ADEQUACY

Despite an estimated net underwriting loss of $2.6 billion in 2024, U.S. property/casualty (P/C) industry results marked a steep improvement over prior year performance with the momentum expected to continue into 2025, according to a new AM Best report. The progress is being helped along by higher interest rates that have fueled stronger investment yields for insurers, creating a buffer against the volatility of weather-related losses.

The annual Review & Preview Best’s Market Segment Report notes that the U.S. P/C insurance industry recorded an underwriting loss of $24.6 billion in 2023, which was offset by net investment income of $72.4 billion. While the sector’s underwriting losses tapered off in 2024, AM Best estimates that the segment’s collective net investment income increased to $85.4 billion and is projected to reach $100.8 billion in 2025.

Commercial lines underwriting results benefitted last year from positive rate momentum in most business lines, while personal lines results were enhanced by both pricing and claims-handling initiatives, as well as improved risk selection. In 2024, the personal auto and homeowners lines ended 2024 with an estimated combined ratio of 101%, an improvement over 2023 when the personal lines segment posted a net combined ratio over 107%.

“On a net basis, both the homeowners multiperil and private passenger auto businesses generated more favorable loss ratios through year end, reflecting the aggressive push for rate adequacy among primary personal lines insurers since early 2022,” said Greg Williams, managing director, AM Best.

AM Best projects an increase of 7.3% in net premiums written for the P/C industry in 2025, following an estimated 10.0% increase in 2024. AM Best estimates personal lines net premium written rose by 12.9% in 2024 and is projecting an increase of 9% for 2025. “Insurers are more determined than ever to achieve the rate increases necessary to address their calculated rate needs, particularly for the lines of coverage such as private passenger auto and homeowners multiperil,” Williams said.

Other highlights from the report include:

• Economic losses from weather-related losses were significant, with only about half that covered by public or private insurance. Two major hurricanes, Helene and Milton, were responsible for a large portion of the losses, with severe convective storms also contributing materially.
• As the potential for frequency and severity of weather-related losses increases, the cost of homeowners insurance is likely to remain elevated.
• Regarding the recent California wildfires, regulatory changes, insurers’ exiting certain markets, and a reluctance to underwrite wildfire risks could have significant implications for the market.
• Downside risks from social inflation, litigation financing, and macroeconomic pressures continued to increase commercial lines claims costs in 2024. These headwinds could weaken prior year loss reserve adequacy over the near term, especially for casualty lines of coverage.

For P/C insurers, the severity of weather-related disasters was exacerbated by the dependence some have on reinsurance, which has been more complex to manage in recent years, prompting some reinsurers to change their risk appetites for catastrophe-exposed personal and commercial property risks. In addition, downside risks from social inflation, litigation financing, and macroeconomic pressures continued to increase commercial lines claims costs in 2024. “These headwinds could weaken prior year loss reserve adequacy over the near term, especially for casualty lines of coverage,” said Jacqalene Lentz, senior director, AM Best.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=351441.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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