US P/C underwriting losses to moderate in 2023, Fitch says

US property/casualty (P/C) industry underwriting results are likely to improve in 2023 as premium rates rise significantly in underperforming automobile and property segments, Fitch Ratings says. However, claims volatility amid higher inflation and macro uncertainty may impede a return to underwriting profitability. The neutral sector outlook on US P/C insurance is premised on stable to improving operating performance in 2023.

Declining underwriting performance in personal lines drove a 31% drop in statutory earnings in 2022 for the P/C industry. The personal lines sector should improve in 2023, as recent pricing and underwriting adjustments take hold amid normalizing insured catastrophe losses.

However, underwriting profits may not return in 2023, and Fitch forecasts a 100.4% industry combined ratio for the full year. Above-average catastrophe-related losses and sharp deterioration in auto segment results drove the industry combined ratio (CR) 3 percentage points higher in 2022 to 102.5%, significantly above the 99%–100% range for the previous four years. Commercial lines combined ratios in aggregate are anticipated to slightly deteriorate from current favorable underwriting profit levels.