May 15, 2025 Reinsurance

Triple-I/Milliman: U.S. P/C Insurance Reports Best Underwriting Results Since 2013, But California Wildfire Losses and Potential Economic Impacts of Tariffs Pose Challenges

Business Wire

MALVERN, Pa.--(BUSINESS WIRE)--
The U.S. property/casualty (P/C) insurance industry reported a net combined ratio (NCR) of 96.6 in 2024 – a year-over-year (YoY) improvement of 5.1 points and the industry’s best underwriting performance since 2013, according to the latest report -- Insurance Economics and Underwriting Projections: A Forward View – from the Insurance Information Institute (Triple-I) and Milliman, a collaborating partner. However, losses from the January California wildfires and emerging economic challenges from tariffs could weigh on industry performance in 2025, potentially offsetting recent momentum.

Key 2024 Highlights:

Personal lines narrowed the profitability gap with commercial lines, as both segments reported net combined ratios under 100 for the year.
Personal auto reported a 2024 NCR of 95.3, a 9.6-point improvement YoY, driven by double-digit net written premium (NWP) growth of 14.4% in 2023 and 12.8% in 2024.
Homeowners’ 2024 NCR of 99.7 marked an 11.2-point improvement over 2023, the first sub-100 result since 2019. The 2024 NWP growth rate of 13.6% was the highest in over 15 years, up from 12.4% in 2023.

Challenges on the Horizon:

General liability continues to soften, posting its worst NCR since 2016, and the third worst since 2010.
The January 2025 Los Angeles County wildfires are expected to drive the worst Q1 performance for the P/C industry in more than 15 years, adding pressure to early-year underwriting results.
For tariffs already in place as of early May 2025, the impact on underlying growth and replacement costs shows signs of negative effects, starting with personal auto, followed by homeowners and renters, commercial auto and commercial property.

Michel Léonard, Ph.D., CBE, chief economist and data scientist at Triple-I, noted that P/C underlying economic growth in 2025 was twice that of U.S. gross domestic product (GDP) growth, at 5% compared to 2.5% YoY. Additionally, P/C replacement costs are expected to increase at a slower pace than the overall U.S. Consumer Price Index (CPI), with rates projected at 1.0% versus 2.0% YoY.

“While P/C economic drivers continue to outperform the broader U.S. economy – with stronger growth and lower replacement cost inflation – we now anticipate a shift in 2025 due to ongoing and expanded tariffs,” said Léonard. “These headwinds are expected to slow the sector’s momentum, potentially leading to a contraction later in the year that could exceed the overall GDP slowdown. Additionally, replacement costs, initially projected to rise more slowly than CPI, may accelerate and begin to outpace it, adding further pressure. Even though rising costs may lead to additional premium increases, these will likely be insufficient to offset slowing consumer spending and corporate investment.”

Jason B. Kurtz, FCAS, MAAA, a principal and consulting actuary at Milliman, a premier global consulting and actuarial firm, noted that adverse prior year development (PYD) for commercial auto and general liability continues to be a significant drag on profitability, having increased for three consecutive years.

Regarding general liability, Kurtz said the line experienced significant reserve strengthening during 2024.

“The 2024 net combined ratio of 110 included a staggering nine points of adverse prior year development, amounting to more than $9 billion of reserve strengthening, the highest seen in at least 15 years. It is also concerning that the hard-market years 2020-2023, which saw significant rate increases, are also seeing reserve increases,” Kurtz said.

Turning to workers’ compensation, Kurtz said combined ratios once again benefited from double-digit favorable PYD for the eighth consecutive year.

Donna Glenn, FCAS, MAAA, chief actuary at the National Council on Compensation Insurance (NCCI), provided a preview of this year’s average lost cost level changes and discussed the long-term financial health of the workers’ compensation system.

“The workers’ compensation system continues an era of exceptional performance with strong results and a financially healthy line,” said Glenn. “And while there are early indications of potential headwinds on the horizon, the industry is positioned well to navigate these challenges.”

Note to News Media:

Insurance Economics and Underwriting Projections: A Forward View is a quarterly report offered exclusively to Triple-I members and Milliman customers. Members of the news media may request copies for reporting purposes only.

About the Insurance Information Institute (Triple-I)

Since 1960, the Insurance Information Institute (Triple-I) has been the trusted voice of risk and insurance, delivering unique, data-driven insights to educate, elevate and connect consumers, industry professionals, policymakers and the media. An affiliate of The Institutes, Triple-I represents a diverse membership accounting for nearly 50% of all U.S. property/casualty premiums written. Our members include mutual and stock companies, personal and commercial lines, primary insurers and reinsurers – serving regional, national and global markets.

About The Institutes

The Institutes® are a not-for-profit comprised of diverse affiliates that educate, elevate, and connect people in the essential disciplines of risk management and insurance. Through products and services offered by The Institutes and nearly 20 affiliated business units, people and organizations are empowered to help those in need with a focus on understanding, predicting, and preventing losses to create a more resilient world.

About Milliman

Milliman leverages deep expertise, actuarial rigor, and advanced technology to develop solutions for a world at risk. We help clients in the public and private sectors navigate urgent, complex challenges—from extreme weather and market volatility to financial insecurity and rising health costs—so they can meet their business, financial, and social objectives. Our solutions encompass insurance, financial services, healthcare, life sciences, and employee benefits. Founded in 1947, Milliman is an independent firm with offices in major cities around the globe. For further information, visit www.milliman.com.