A report released by rating agency A.M. Best Co. Inc. on Feb. 19 suggests that the property/casualty insurance industry should experience another year of underwriting profit for the year 2016.
The report, entitled “Property/Casualty Industry Expected To Produce Third Consecutive Underwriting Profit While Net Income and Surplus Growth Slow,” said that the forecast would follow last year’s projected profitability. The agency said that the industry’s estimated combined ratio for 2015 is anticipated to depreciate marginally from that of a year ago, from 97.4% to 98.0%, as rate increases slow down and the level of favorable loss reserve development declines slightly.
“With net investment income also declining, pre-tax operating profit is projected to fall by 2.1%, to $59.9 billion,” the agency stated in the report. Best’s study also noted that net income is expected to drop in 2015 from $63.5 billion to $60.1 billion, but it will remain above its five-year average.
The agency said that for 2016, “further deterioration in the calendar year combined ratio is expected,” with the combined ratio deteriorating to 99.2%. The forecast was made with considerations for the absence of any changes in prior years’ loss reserves, as well as signs of a return to a more average level of catastrophe losses.
Best anticipates that 2017 will mark a fourth consecutive year of underwriting profitability.
