What are the most pressing challenges facing US insurers today?

New report predicts macroeconomic fundamentals for P&C insurers will be mixed

What are the most pressing challenges facing US insurers today?

Insurance News

By Mika Pangilinan

A new report from the Insurance Information Institute (Triple-I) has identified slow underlying growth and inflation as the major challenges facing US auto, home and business insurers.

According to Triple-I’s Q1 2023 Economic Outlook, the property and casualty sector saw its cyclical underlying growth rebound fail to materialize in the second half of 2022, as interest rate tightening impacted housing starts, corporate spending, and vehicle expenditures.

Additionally, P&C replacement costs, such as vehicle parts and housing construction materials, have slowed down over the last two quarters but are still up 40% since 2019.

Triple-I’s chief economist and data scientist, Dr. Michel Léonard, CBE, said long-term growth would likely remain below 2%, while long-term inflation would stay above 2.5%.

“A recovery by year-end 2023 remains unlikely as the Fed continues its hawkish policy and bond yields increase,” Léonard said. “However, the Consumer Price Index is likely to decrease as pandemic supply chain disruptions ease, and commodity and energy prices reach a precarious war-time equilibrium.”

In terms of GDP growth, Triple-I was slightly more optimistic that the Federal Reserve, forecasting that the nation’s GDP would grow slightly above Fed expectations between 2023.

The macroeconomic fundamentals for P&C insurers are also expected to be mixed for the rest of the year, according to the Triple-I report.

“Property and casualty insurer net premiums written are forecast to continue to grow due to hard market conditions regardless of slowing underlying growth,” said Dale Porfilio, Triple-I’s chief insurance officer. “Underwriting losses, however, are expected to persist, driven by challenging results in personal lines.”

Triple-I’s predictions for P&C insurers come after a report by Verisk and the American Property Casualty Insurance Association (APCIA) revealed that the sector saw a net underwriting loss of $ 26.9 billion, the largest since 2011.

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