The private U.S. property/casualty insurance industry had solid results in 2019, with increases in net income, underwriting gains, and policyholders' surplus, but faces considerable challenges in 2020 as the effects of the COVID-19 pandemic unfold, according to Verisk (Nasdaq:VRSK), a leading data analytics provider, and the American Property Casualty Insurance Association (APCIA).
Net income after taxes rose to $61.4 billion in 2019 from $59.6 billion in 2018. Net underwriting gains increased to $3.7 billion, after $0.2 billion of net underwriting losses a year earlier, due in part to high catastrophe losses in 2018. The industry's surplus reached a record high $847.8 billion by the end of the 2019, as the stock market recovered from a significant downturn a year earlier.
Moving forward, several factors related to COVID-19 could affect industry results in 2020, including the following:
-- Millions of people are staying at home and driving less, leading many insurers to react by returning a portion of personal auto premiums during the pandemic.
-- Many businesses had to close or significantly curtail their activities.
-- High unemployment rates and declines in consumption and business activity may persist through 2020.
-- The economic effects of the pandemic could suppress insured commercial exposures and limit demand for a wide range of coverages.
-- The stock market plunge in first-quarter 2020 could potentially generate significant capital losses for insurers, reverting the recent gains in the industry's surplus.
"The property/casualty industry finished 2019 with modest underwriting gains after two consecutive years of reporting underwriting losses," said Robert Gordon, APCIA senior vice president, policy, research, and international. "The combined ratio improved slightly year-over-year but worsened significantly compared to the first half of 2019. While insurers enjoyed significant capital gains in 2019, the additional surplus has been substantially decimated by subsequent market declines and COVID-19 related expenditures in the first few months of 2020. As we enter a period of increased uncertainty due to the coronavirus, insurers will be closely monitoring legislative, regulatory, and lawsuit abuse trends that could negatively impact the industry's financial stability."
"Insurers experienced solid results last year, supported by a drop in catastrophe losses and economic growth," said Neil Spector, president of ISO. "However, insurers are facing a wide range of challenges this year because of COVID-19. The pandemic has already delivered unprecedented shocks to the economy and created much uncertainty about how the remainder of 2020 will shape up. It's unclear how the pandemic will affect underwriting results and the performance of insurers' investments in 2020. Like many other businesses, insurers are looking to protect the well-being of their staff while dealing with unprecedented operational challenges in their effort to provide uninterrupted service. Carriers need to stay informed of the latest developments in the marketplace and be equipped with robust data and remote technology to meet the challenges they'll face both now and in the future. At Verisk, we've created an online resource page at verisk.com/insurance/covid-19/ to help insurers learn about new regulations, read about critical insights, and discover new products we're creating to address the effects of COVID-19."
Insurers' net income after taxes rose to $13.4 billion in fourth-quarter 2019 from $10.2 billion in fourth-quarter 2018. Their combined ratio improved to 102.1% in fourth-quarter 2019 from 104.6% a year earlier.
Net written premiums rose to $152.7 billion in fourth-quarter 2019 from $143.7 billion in fourth-quarter 2018. Net underwriting losses shrunk to $1.7 billion in fourth-quarter 2019 from $4.9 billion a year earlier.
View the full report from Verisk and APCIA here.
Verisk (Nasdaq:VRSK) is a leading data analytics provider serving customers in insurance, energy and specialized markets, and financial services. Using advanced technologies to collect and analyze billions of records, Verisk draws on unique data assets and deep domain expertise to provide first-to-market innovations that are integrated into customer workflows. Verisk offers predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, global risk analytics, natural resources intelligence, economic forecasting, and many other fields. Around the world, Verisk helps customers protect people, property, and financial assets.
Headquartered in Jersey City, N.J., Verisk operates in 30 countries and is a member of Standard & Poor's S&P 500 Index. In 2018, Forbes magazine named Verisk to its World's Best Employers list. For more information, please visit www.verisk.com.
Representing nearly 60 percent of the U.S. property casualty insurance industry, the American Property Casualty Insurance Association (APCIA) promotes and protects the viability of a competitive private insurance market for the benefit of consumers and insurers. APCIA represents the broadest cross section of home, auto, and business insurers of any national trade association. APCIA members represent all sizes, structures, and regions, which protect families, communities, and businesses in the U.S. and across the globe. For more information, visit www.pciaa.net.
Edelman (for Verisk)
Jeffrey Brewer for APCIA
Loretta Worters for I.I.I.
-- Net Income Chart_2019_Q4
-- 2019 by the Numbers