US P/C insurers remain under intense pressure

The US property/casualty insurance industry remains under intense pressure due to ongoing severe inflation, escalating claims costs coupled with record natural disaster losses and skyrocketing capital costs, a new white paper by the American Property Casualty Insurance Association (APCIA) has said.

The paper, called ‘ Hard Market Cycle Arrives: Inflation, Natural Disasters, and More Straining Property Insurance Markets’ by APCIA and University of South Carolina Associate Professor Robert Hartwig, examines the top inflation trends, natural disaster losses and financial impacts.

“The US property/casualty insurance industry is facing significant pressure from rising economic inflation, legal system abuse, supply chain constraints, increasing catastrophic weather driving up losses, and historic cost increases for reinsurance and other forms of capital,” said Karen Collins, APCIA vice president, property and environmental.

“The combined effects are resulting in the hardest market cycle in a generation. Commercial and personal property lines customers, particularly those in high-risk regions, may feel the effects of recent, elevated cost trends.

“This unusual combination of challenges has created a perfect storm resulting in a significant deterioration in personal lines loss results in 2022, according to Fitch and S&P Global Market Intelligence,” said Collins.

“The growth of population, housing, and businesses in hazard-prone areas are exacerbating the effects of climate change, leading to more frequent and severe catastrophe losses. The higher costs of capital and reduced reinsurance capacity are further exerting upward pressure on insurance rates and may result in stricter underwriting in catastrophe-exposed markets.

“We must work together to mitigate homes and properties to bend down the loss curve,” said Collins. “The insurance industry is encouraging homeowners, renters, and businesses to mitigate potential losses by hardening homes, communities, and businesses. Mitigation is the key to easing the pressure on costs for everyone.”