U.S. Insurance Sector Achieves Underwriting Gain in 2024
According to a recent report from Verisk (VRSK) and the American Property Casualty Insurance Association (APCIA), the U.S. Property/Casualty (P&C) insurance industry saw a significant turnaround in 2024. The industry recorded a net income of $170 billion, including capital gains, and achieved its first underwriting gain in four years, a substantial improvement from the prior year’s losses.
Key Financial Highlights:
The report indicates positive developments such as:
- Underwriting Gain: The industry recorded an underwriting gain of $24.8 billion, a positive shift from the $21.8 billion loss in 2023.
- Net Income: $170 billion, although $70 billion of this came from capital gains realized by one insurer.
- Combined Ratio: Improved to 96.4% from 101.6%.
- Premium Growth: Written premiums increased to $926 billion, up from $851 billion in 2023.
- Policyholders’ Surplus: Grew to $1,082 billion.
Despite these positive indicators, the industry continues to grapple with various challenges. The most significant of these include the impact of natural catastrophes, rising inflation, and legal system abuse.
Navigating Headwinds
The surge in natural disasters, particularly Hurricane Milton, significantly impacted the industry. The fourth quarter of 2024 saw catastrophe claims surge 113% year-over-year, highlighting the volatility and financial strain insurers are facing.
“While many of the loss drivers of 2023 persisted into 2024, the industry’s ability to bring premiums closer to the requisite levels has led to an underwriting gain for the first time since 2020,” said Saurabh Khemka, co-president of Underwriting Solutions at Verisk.
Furthermore, the industry is facing challenges in property coverages. Homeowners insurers are likely to report their seventh consecutive year of underwriting losses. Additionally, rising inflation and legal system abuse are impacting personal auto insurance.
Strategic Outlook
The report suggests that insurers will need to rely on technology, data analytics, and sophisticated approaches to navigate these complex market conditions. This includes:
- Enhancing data-driven decision-making
- Improving underwriting accuracy
- Strengthening risk assessment capabilities
These efforts will be crucial to help insurers sustain profitability and manage the evolving risks in the property/casualty space.
The report underscores the importance of proactive risk management strategies and the need for insurers to adapt to changing market dynamics to ensure long-term stability and success.
