How Bad Was P/C Insurers’ Underwriting Loss in 2017?

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The U.S. property/casualty industry recorded a net underwriting loss of $23.5 billion for year-end 2017, according to preliminary results from A.M. Best. That was $18 billion bigger than the underwriting loss in 2016.

The 2017 underwriting loss was mainly due to an estimated $52.9 billion paid out for catastrophes, more than double what P/C insurers handled the previous year, according to the A.M. Best analysts.

The industry’s combined ratio for the year came in at 103.8, a three-point deterioration versus what it was in 2016. The 103.8 ratio was the worst of the last five years.

A.M. Best estimates that the catastrophe losses account for 10.0 points on the P/C industry’s combined ratio, up from an estimated 4.9 catastrophe points in the prior year.

The $52.9 billion estimate of 2017 P/C industry catastrophe losses is a 109.8 percent increase over 2016 and dwarfs A.M. Best’s previous industry record for estimated insured losses of $41.9 billion recorded in 2011. The figure for 2011 included losses from the Tohoku earthquake and subsequent tsunami in Japan, an active tornado season in the U.S. and flooding in Thailand.

For this Best’s Special Report, “First Look – 2017 Property/Casualty Results,” the analysts used data from companies’ 2017 annual statutory statements received as of Mar. 9, 2018, representing an estimated 96 percent of the total P/C industry’s net premiums written.

Net income for the P/C industry was $40.8 billion, down 1.7 percent from 2016.

The results were helped by a $5.6 billion jump in net investment income earned in 2017, though it was mostly offset by a $5.2 billion loss in other income. This reflected the impact of a retroactive reinsurance contract AIG and National Indemnity signed in early 2017, A.M. Best said.

Despite the slight decline in net income, industry surplus grew 6.8 percent to $733.8 billion in 2017, driven by a $39.4 billion increase in unrealized capital gains, which was offset by a $17.5 billion decrease in other surplus gains and a $4.4 billion increase in stockholder dividends.


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