Only 40% of top US P&C insurers profitable over past five years

Only 40 percent of the top 100 US property and casualty (P&C) insurers reported an underwriting profit over the last five accident years.

This is the finding of Guy Carpenter in its 2016 edition of its annual insurance risk benchmarks report, Balancing Risk and Growth in a Changing Market: Annual Statistical Review.

For US P&C insurers, general liability lines and special property lines provide the greatest opportunity compared to other lines due to benign loss cost trends and subdued catastrophe activity.

Guy Carpenter added that most carriers had experienced underwriting losses in personal and commercial auto in 2015, continuing the “trend of adverse loss costs in auto lines”.

The lines that provide carriers with the greatest ability to differentiate on underwriting excellence are medical malpractice and other commercial casualty lines, according to the report.

It added that workers’ compensation and personal lines have the most homogeneous results among carriers.

“US insurers are facing an increasingly complex set of issues and significant disruption that requires them to innovate across their business to achieve profitable growth,” said Tim Gardner, chief executive officer of Guy Carpenter’s US operations.

“With low investment returns and a lack of significant prior years reserve release in 2015, many insurers are looking to raise their premium to surplus leverage through either growth and/or capital return as a way of improving the return to stakeholders.”

Given the low yield environment, it is more important than ever to have underwriting discipline, said the company.

The insurance industry was able to achieve a third straight year of net underwriting gain, it said.

Prior to 2013, the industry had recorded an underwriting gain in only four of the preceding 17 years.

In 2015, the US P&C market “departed from a six-year period of robust surplus growth and modest loss reserve increases”, explained the report.

While US industry surplus remained flat last year, loss reserves grew at 3 percent. According to Guy Carpenter this was the fastest rate of growth since 2008 and an inflection point of adverse reserve development in the future calendar years.