Verisk, a leading global data analytics and technology provider, and The American Property Casualty Insurance Association (APCIA), the primary national trade association for home, auto, and business insurers, remarked on full-year 2023 losses for the insurance industry, which they estimate to be $21.1 billion. According to key financial indicators for private U.S. property/casualty insurers, 2023 followed similar trends in underwriting losses to those seen in a difficult 2022.
While the estimated industry net underwriting loss of $21.1 billion is lower than the $24.8 billion reported in the previous year, net income is at the lowest level it has been in more than 10 years. In 2023, it declined to $35.7 billion, compared to $44 billion in the preceding year, representing a 19 percent decrease.
Incurred losses and loss adjustment expenses for 2023 increased by 10.1 percent, while earned premiums grew by 9.9 percent. The combined ratio, a crucial measure of profitability for insurers, barely changed at 101.6 percent in 2023 versus 102.4 percent in 2022.
The preliminary results, as shown in the table below, represent consolidated estimates derived from annual statements submitted by insurers to insurance regulators. These results are based on approximately 96.9 percent of all business underwritten by private U.S. property/casualty insurers.
“Insurers experienced a second straight year of net underwriting losses with over $21 billion in red ink in 2023 following nearly $25 billion in 2022,” said Robert Gordon, senior vice president of policy, research, and international at APCIA. “While overall industry surplus – representing the supply capacity for insurance coverage – modestly increased in 2023 thanks to investment gains, it has still not recovered from the $72 billion contraction in 2022 and fell to a five-year low relative to premium revenue. Homeowners and auto insurance performed particularly poorly: in both 2022 and 2023, loss ratios exceeded levels not seen in more than 20 prior years. As insured losses skyrocket, many policyholders in the U.S. face rising insurance costs and availability challenges, which is why the insurance industry is analyzing these issues and advocating for solutions. However, the market won’t fully stabilize until insurers can close the gap between losses and rates.”
“Despite only one US landfalling hurricane in 2023, we saw elevated catastrophe activity. Severe convective storms were a key driver of underwriting results for the year, particularly in homeowners,” said Saurabh Khemka, co-president of underwriting solutions at Verisk. “On the premium side, the hard market and steady exposure growth have eased some of the pressures in commercial lines. However, even with another year of double-digit rate increases, rate adequacy continues to be a major challenge for personal auto driven by inflation, supply chain shortages, and labor shortages.”
In 2023, the policyholders’ surplus improved from Q3’s $950.8 billion to $1,014.8 billion; however, insurers’ rate of return on average policyholders’ surplus, a crucial component of overall profitability, decreased to 3.6 percent in 2023, down from 4.4 percent in 2022.
Fourth quarter sees year-over-year improvements in premiums and combined ratios, attributable to a sharp decrease in cat events.
In the fourth quarter of 2023, the industry’s net income increased to $18.8 billion, up from $10.6 billion in the same period of 2022.
- While the first half of the year experienced record-breaking catastrophe activity, activity in the second half was below-average, most notably in the fourth quarter. Catastrophe losses for Q4 of 2023 were the lowest quarterly cat losses since 2015 and the fewest quarterly catastrophe events since 2016. Net written premiums increased by $17.9 billion in the fourth quarter of 2023, representing a growth of 9.7 percent compared to the previous year.
- Net underwriting gains rose to $9.7 billion in the fourth quarter of 2023, rebounding from $3.7 billion in losses reported in the same quarter one year earlier.
- The combined ratio improved from 103.0 percent in the fourth quarter of 2022 to 96.8 in the same period this year.