The third-quarter combined ratio for the US property/casualty insurance industry worsened to about 106.6% from 103.7% in the second quarter, its highest level since 2017, Standard & Poor’s said. Global Market Intelligence in a report on Tuesday.
The deterioration in the industry’s key measure of profitability came as personal lines insurers felt the brunt of losses from Hurricane Ian and inflationary pressures.
At $15 billion, the industry’s net technical loss also marked a 20-quarter high, according to S&P Global’s preliminary estimate.
However, continued strong growth in written and earned premiums and favorable calendar-year results in workers’ compensation helped mitigate the extent of the loss, S&P Global said in its analysis.
Catastrophic losses in the quarter affected several property lines, including private auto physical damage coverages, while high costs to repair and replace vehicles and longer-than-usual times to close auto insurance claims continued to weigh about the industry, he said.
The private car line generated a direct incurred loss ratio of 84.7% in the quarter, including 80.7% in private car liability and a staggering 90.4% in private car physical damage, according to the report.
Loss ratios also increased in the quarter in the homeowners, commercial multiperil and fire and related lines due to Ian, as well as higher labor and construction material costs, according to S&P Global analysis.
At the other extreme, the rate of direct incurred losses in the calendar year for workers’ compensation fell to a meager 43.6% from 45.8% in the second quarter. Direct losses incurred in compensation decreased during a period of rapid premium growth as employer payrolls increased.
The data reinforces the urgency that insurers have already shown around rate increases in the private auto business, S&P Global said.
“It also speaks to the considerable volatility that catastrophe losses continue to inject into quarterly results, even after accounting for significant hurricane reinsurance coverage,” he said.
Net technical losses in the quarter often led to net losses or lower levels of net income for individual property/casualty insurers, according to the report.
Downward pressure on valuations of fixed income and equity securities also led to widespread negative net changes in unrealized capital gains and losses for the third consecutive reporting period.
About 51% of individual entities for which data is available as of September 30 showed a decline in policyholder surplus relative to June 30 levels, according to the report.