While the overall impact from the COVID-19 pandemic on US property and casualty (P&C) insurers was limited in the 1Q2020 reporting period, ratings agency AM Best anticipates that the impacts will be considerably more apparent in second quarter 2020 results.
In the first quarter of 2020, the US P&C insurance industry saw greater changes in line of business underwriting results than normal with personal lines displaying favourable movement according to a recent report from AM Best titled ‘First Look: 3-Month 2020 Property/Casualty Financial Results’.
However, the report noted that the industry’s surplus level decreased by 9.3% to $744.9bn during 1Q2020 compared with year-end 2019 based on preliminary results. Part of that drop-off in surplus was attributed to a change in net unrealised capital losses of $83.4bn.
At the same time, net investment and other income for the industry declined slightly in the first quarter compared to the prior-year period.
Commenting on these statutory results, AM Best director Jennifer Marshall said that an initial look at the industry showed that investments overall seem to have held up well with the exception of equity holdings. Total equity holdings were down approximately by 21% in 1Q2020 compared with the same prior-year period.
“At this point, the best we can reasonably expect would be a continued improvement in equity markets through the end of the (second) quarter. We do anticipate a heightened level of investment market volatility to continue until the threat of COVID-19 abates. Net investment income may be affected as dividends received may decline with the reduction or suspension of dividends on owned equities,” she said.
Findings published by AM Best in its report are based on data derived from companies’ three-month 2020 first quarter statutory statements received by the agency as of 19 May. These companies account for an estimated 95% of total US P&C insurance net premiums and 93% of policyholder surplus.