Turbulent 2020 triggers drop in insurers’ profits: Verisk/APCIA report

01-06-2021

Property/casualty insurers weathered a turbulent year in 2020, buffeted by a global pandemic that deeply disrupted economic activity and a historic catastrophe season that caused nearly $62 billion in insured losses, according to a report from Verisk and the American Property Casualty Insurance Association (APCIA).

Private US property/casualty insurers’ net income after taxes fell 2.9 percent to $60.1 billion in 2020 from $61.9 billion in 2019. Insurers’ rate of return on average policyholders’ surplus, a measure of overall profitability, declined to 6.8 percent from 7.8 percent in 2019.Insurers provided roughly $11.5 billion in premium relief to policyholders despite reporting a 5.6 percent decline in net investment income caused by the lowest investment yield since at least 1960.

Insurers’ combined ratio, which measures underwriting performance, did improve somewhat to 98.7 percent in 2020 from 98.9 percent in 2019 and insurers’ net underwriting gain increased to $5.1 billion from $3.7 billion in 2019.

“Insurers’ net income and net written premium growth declined in 2020 as the industry was hit by the pandemic and severe natural catastrophe losses,” said Robert Gordon, APCIA senior vice president, policy, research and international. “Investment yields fell to the lowest level since at least 1960. Insurers eked out a $5.1 billion underwriting gain on more than $650 billion of NWP after reserve releases, although that gain may not reflect the potential of significant long-tail losses from COVID-19.

“The drop in personal lines combined ratio is reflective of the drop in the personal auto combined ratio which is largely due to a temporary reduction in miles driven. While personal auto writers provided various forms of rebate and significant rate reduction, severity of claims continued to climb significantly, and miles driven has been rapidly increasing in 2021.”

Neil Spector, president of ISO, a Verisk business, added: “During a challenging year, many insurers accelerated their digital transformations and used new technology, like our OneXperience virtual inspection platform, to continue serving their customers. Now, at a moment of great uncertainty—about the continued course of the pandemic, the potential for future climate-driven catastrophes, and the contours of our emerging ‘new normal’—it’s critical for insurers to further enhance their operational efficiencies and sharpen the use of data-driven insights as they reset from 2020.”

Verisk, American Property Casualty Insurance Association, APCIA, Property, Casualty, P&C, Insurance, Reinsurance, Neil Spector, Profit, North America

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