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7/29/2016 By Christopher Monahan

In May 2016, the National Association of Insurance Commissioners (NAIC) released the 2015 Property/Casualty & Title Insurance Industry Report. The report — which includes yearly results related to industry premiums, losses and investments — confirms that the strong performance the P/C industry saw in 2013 and 2014 continued in 2015.

Over this time period, the combined ratio – a ratio of expenses to premiums – has remained below 100, indicating a total underwriting profit each year ($11.5 billion in 2015, $14.7 billion in 2014 and $20.1 billion in 2013). This cycle of profitable underwriting is not typical for the P/C industry. In fact, there has not been a three-year stretch of underwriting profits since the 1970s.

Supporting the last three years of underwriting profit are two recent trends in the P/C industry: healthy premium growth and low catastrophe losses (the U.S. has not had a major hurricane since 2005, when both Katrina and Wilma made landfall). The report suggests that the underwriting profit is driven more greatly by the latter; nonetheless, the increase in net premiums written has been substantial since 2012, increasing 12 percent (from $465.8 billion to $522.4 billion).

In addition to improving underwriting profitability, the continued growth in net premiums written has provided the P/C industry with even more cash to invest, and thus to earn interest on. As a result, net investment income earned has remained high over the last three years and, similarly, so has net income, which increased 56 percent since 2012 (from $36.5 billion to $56.8 billion). Another component of net income, unrealized gains/losses, will be discussed in the coming months along with the 2016 Annual Report on the Insurance Industry, expected to be released by the Federal Insurance Office in September.

A final reflection of the P/C industry’s profitability is policyholder surplus, which reached $703.6 billion in 2015 (a 56 percent increase from 2005). Awash with capital, the P/C industry ended 2015 with another strong showing. Given that it has been a record 129 months since a major hurricane made landfall in the U.S., 2016 may be yet another year of low catastrophe losses — potentially extending the stretch of underwriting profits.

The question is: Do you think this trend will continue?


Christopher Monahan

About Christopher Monahan

Chris Monahan leads KCIC’s Chicago office, handling both business development and marketing responsibilities as well as claims management and analysis for new and existing clients.

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