Challenges to growth remain in P&C space despite positive sentiment

While 2016 was a record year for the industry on the surface, red flags remain, a new study says

Challenges to growth remain in P&C space despite positive sentiment

Insurance News

By Ryan Smith

While the property and casualty industry is well-capitalized and market sentiment is, for the most part, positive, challenges to profitable growth remain, according to global risk and reinsurance specialist Guy Carpenter & Company.

The Marsh & McLennan subsidiary has released a study highlighting the “economic and market-based headwinds” it said the industry is facing.

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“On the surface, 2016 was a record-setting year for the P&C industry, with surplus reaching its highest level in history,” said Tim Gardner, Guy Carpenter’s president for North America. “Rate reductions continued to moderate, and there was optimism following the 2016 election given the potential for tax cuts and deregulation. Yet red flags remained, and a closer look at the individual metrics contributing to the growth in surplus revealed interesting trends.”

Last year, for instance, emerging risks, the frequency and severity of catastrophes, and shifting capital needs contributed to a 0.4% underwriting loss for the industry – its first calendar-year underwriting loss since 2012. The average large P&C carrier saw its accident year loss ratio up by 2% from 2015, and the auto segment saw losses driven by frequency and severity shifts, Guy Carpenter reported. Only 10 of the top 100 personal auto writers, and only 30 of the top 100 commercial auto writers, saw an underwriting profit last year. And the industry’s accident year loss ratio jumped from 62% in 2013 to 67% in 2016, the study found.

“The personal auto losses forced smaller companies to rethink strategy and mix of business as the large underwriters continued to engage in the predictive modeling and marketing war,” said Guy Carpenter managing director Julia Chu.

 

 

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