Until Superstorm Sandy hit on October 29, the U.S. property/casualty industry was on track to record a significant improvement in financial results following 2011’s substantial underwriting loss, including an improved combined ratio of 100.1 with net income more than twice its 2011 level, according to a newly released special report from A.M. Best Co.

The impact of what is likely to become the second-costliest U.S. natural disaster in terms of insured losses, after 2005’s Hurricane Katrina, has been apparent on income statements throughout the P&C industry, with the industry’s underwriting loss increasing by $26 billion and net income deteriorating $10 billion during the fourth quarter, based on A.M. Best’s estimates of 2012 full-year results.

According to A.M. Best, as net premiums written and policyholders’ surplus continue to increase, P&C insurers should be looking forward to an improved 2013.

The outlook for the commercial lines segment, however, remains negative for 2013. Insurers are still grappling with competitive market conditions, less favorable loss reserve development, sluggish economic growth and depressed investment yields; and these factors will most likely result in more negative rating actions than positive rating actions during this year. Yet, A.M. Best believes the industry overall is sufficiently well-capitalized to overcome them.

The personal lines segment has maintained a stable outlook. While volatility from weather-related events is expected to continue to impact the property lines, the automobile portion of the segment remains generally stable.

The reinsurance sector maintained its stable outlook supported by continued strong risk-adjusted capitalization, judicious enterprise risk-management practices and a relatively stable pricing environment across a broad array of business classes. These strengths should help sustain reinsurers’ overall financial position over the longer term given uncertain global macroeconomic conditions.

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