Over the past five years, commercial auto insurance has experienced the most consistent underwriting results compared to other commercial lines and has generated better results than personal auto, despite the difference in the sizes of the markets, according to a new report from Fitch Ratings. The report examines the financial performance of those markets and the 20 largest market participants. However, declining premium rates over an extended period and declining insured exposure from the economic downturn are causing commercial auto underwriting performance to deteriorate.

“Commercial auto insurance is not only the fourth largest commercial lines insurance segment, but also is a barometer for performance in the broader commercial insurance market,” said Jim Auden, managing director in Fitch's North American Insurance Group.

In calendar year 2011, the commercial auto insurance market experienced a combined ratio of 103.6 percent, the first underwriting loss in nine years. Fitch notes market fundamentals for commercial auto insurance are improving, and project a return to profitability in 2013.

The report includes an examination of results from the top 20 auto insurance writers, which reveals wide variation in underwriting performance.

“Commercial auto premium is more dispersed across companies than many other segments. Market composition remains fragmented, but it has changed moderately in the last several years in part due to acquisitions,” the report said, and shows considerable disparity in the underwriting experience of the largest commercial auto writers. According to the report, the Allstate Corporation, Erie Insurance Group and Progressive Corporation had the strongest commercial auto underwriting margin over the last five years.

Top 20 Commercial Auto Insurers of 2011:

Travelers

Liberty Mutual

Progressive

Nationwide

AIG

Old Republic

Auto-Owners

Hartford

W.R. Berkley

State Farm

Zurich American

C N A

Cincinnati Financial

Tokio Marine & Fire

Allstate

Erie

QBE the Americas

Great American

Farmers

Hanover

Travelers remains the leading commercial auto writer, followed by Liberty Mutual and Progressive Corporation. Comparing growth rates of premium volume over five years shows wide disparity.

Most companies have experienced a significant decline in commercial auto premiums, corresponding with shrinking premium volume for the industry. However, Liberty Mutual, Tokio Marine & Fire and QBE the Americas, have shown large premium growth over the period, attributable largely to acquisitions.

There is also a wide disparity in commercial auto underwriting profitability across companies; using IEE data Fitch calculated the underwriting margin (underwriting profit/(loss) divided by earned premium) for the commercial lines segment of the top 20 underwriters.

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