In 2020, the US property and casualty (P&C) insurance industry was dealt a heavy blow by the COVID-19 pandemic – but there were other factors at play that put insurers in an even tougher spot, a new report has found.
The report, prepared by global data analytics provider Verisk and the American Property Casualty Insurance Association (APCIA), noted that the US P&C industry’s net income after taxes dropped 27.5% to $35.1 billion in the first nine months of 2020. The industry’s net underwriting gains also greatly declined to $0.3 billion, from $5.4 billion a year earlier.
Verisk and APCIA have attributed this deterioration in underwriting results in part to a major increase in the losses and loss adjustment expenses from catastrophes, which have more than doubled to $47.1 billion for the first nine months of 2020, compared to $21.5 billion during the same period in 2019.
Citing data from its subsidiary PCS, Verisk reported that 2020 set a record for the number of catastrophic events in the US. Catastrophic events last year included 19 events with at least $1 billion in direct insured losses in the US – 17 of which occurred during the first nine months of 2020. Those events also included the first riot and civil disorder event to exceed the $1 billion threshold.
The US also recorded one of the largest deteriorations on the Verisk Maplecroft Civil Unrest Index over the past year, the report said. America moved from being the 91st riskiest jurisdiction by the second quarter of 2020 to the 34th.
Not all US insurers saw losses; auto insurers benefitted from the reduced driving activity in 2020, the report noted. The pure loss ratio for auto insurance improved to 56.6% from 65% during the first nine months of 2020, compared to the same period in 2019. This led to many insurers adjusting to the sudden drop in losses by offering partial premium refunds and lowering rates. Verisk cited data from its other business ISO, which found that insurers provided approximately $11 billion in direct premium refunds and renewal credits to policyholders.
“Insurers in the third quarter of 2020 continued to be hammered by COVID-19, natural catastrophes, and civil unrest losses,” said APCIA senior vice president of policy, research, and international Robert Gordon, who added that “the industry continues to face the strong headwinds of unknown but potentially severe future COVID-19 related losses and long-term claims.”
“The beginning of COVID-19 vaccination efforts has provided some hope for people in the United States and across the globe,” commented Verisk ISO president Neil Spector. “But the US economy and the insurance industry still face many challenges which will depend on our progress in ending the pandemic.”
