Benefits for US commercial insurers from recent sharp premium rate improvement are likely to be delayed by effects on underwriting results from the coronavirus pandemic and consequent economic fallout according to credit ratings firm Fitch Ratings.
The pandemic is said to have introduced considerable uncertainty for near-term underwriting performance that is expected to extend into 2021.Its largest initial effect on P&C insurers was tied to unrealised losses on equity investments amid a sudden sharp market decline.
Industry statutory surplus fell by nearly 10% in 1Q20 from 2019 record levels and although markets remain volatile, Fitch expects surplus will recover a material portion of this reduction based on second-quarter market improvement.
To date, North American publicly traded (re)insurers tracked by the agency have reported an estimated $2.2bn in pandemic-related losses.
Meanwhile, loss estimates from Lloyd’s of London and large multinational (re)insurers put global reported losses between $11bn and $13bn.
These figures are forecast to rise substantially with second-quarter earnings results and over subsequent quarters but still represent more of an earnings event rather than sharply reducing capital adequacy.
At the same time, claims cost and economic uncertainty have contributed to further acceleration of commercial premium rate increases in 2020.
The commercial insurance sector was poised for 2020 profit improvement following two consecutive years of statutory industry commercial lines combined ratios (CR) slightly below 100%.
However, prices in 1Q20 increased at the highest pace since 1Q03 according to The Council of Insurance Agents & Brokers’ latest commercial lines market survey.
Prices have moved higher in liability segments with larger 2019 calendar year underwriting losses, including a 2019 CR of 105% in other liability, 109% in commercial auto and 112% in medical professional liability.