US P&C Insurance Sector Posts Strong Rebound in 2024
The US property and casualty (P&C) insurance industry experienced a remarkable recovery in 2024, according to a joint report from Verisk and the American Property Casualty Insurance Association (APCIA). The sector generated an estimated $170 billion in net income for the full year.
Even after excluding over $70 billion in capital gains from a single insurer, the adjusted net income reached a substantial $100 billion. A key driver of this positive shift was a $24.8 billion underwriting gain, a significant improvement from the underwriting losses recorded in 2023. The industry’s return to profitability marks the first full-year underwriting gain since 2020.
Verisk and APCIA attributed this turnaround primarily to premium increases that more closely aligned with the evolving risk landscape. Saurabh Khemka, co-president of underwriting solutions at Verisk, noted that while several loss drivers from 2023 persisted into 2024, strategic pricing adjustments helped the industry move towards profitability.
2023: A Year of Losses and Challenges
The P&C insurance sector faced considerable headwinds in 2023. The industry recorded a net underwriting loss of $21.2 billion, a slight improvement from the $24.9 billion loss of the prior year. The period was marked by severe weather events, which resulted in substantial insured losses. Persistently high inflation also contributed to increased claim costs, further affecting profitability. Rising reinsurance costs added to the financial burden. These factors culminated in the worst underwriting loss in a decade for the industry.
Key Improvements in 2024
Total written premiums for 2024 reached $926 billion, a significant increase from $851 billion in 2023. Earned premiums also rose, reaching $895 billion, reflecting a 9.8% increase compared to the previous year’s 9.7% growth. Furthermore, the industry saw a substantial improvement in loss and loss adjustment expenses, which increased by only 1.9% – a considerable decrease compared to the 10.1% rise in 2023. The combined ratio, a key metric of underwriting profitability, improved to 96.4% in 2024, down from 101.6% the previous year. The industry’s policyholders’ surplus also saw growth, increasing from $1.013 trillion at the end of 2023 to $1.082 trillion by the end of 2024.
Robert Gordon, senior vice president for policy, research, and international at APCIA, highlighted the notable shift the industry experienced, moving from an underwriting loss in 2023 to a gain in 2024. However, he cautioned that homeowners insurers are likely to report seven consecutive years of underwriting losses by the end of 2025. He attributed this to the impact of major events like the California wildfires in January.
The second half of 2024 showed particularly strong results, with the industry reporting a net underwriting gain of $21 billion, compared to $3.8 billion in the first half of the year and $1.7 billion in the same period in 2023. While hurricanes Helene and Milton substantially impacted catastrophe claims in the third and fourth quarters, overall results improved. The net written premiums rose by $29.8 billion in the second half, a 6.9% year-over-year increase. The combined ratio for the second half of 2024 improved to 95.3, down from 99.1 in the second half of 2023, further illustrating the industry’s recovery and improved financial performance.
