Positive first-quarter economic and underwriting results for property/casualty insurance are consistent with expectations that the industry will see a small underwriting loss in 2024 and achieve profitability in 2025, according to the latest forecast report from the Insurance Information Institute (Triple-I) and Milliman.

the report, Insurance Economics and Underwriting Prospects: A Look AheadThe study highlights several key findings. Homeowners insurance is expected to continue to experience underwriting losses through 2024 and 2025, but is expected to become profitable in 2026. This line will see continued double-digit growth in net written premiums over the next two years. Meanwhile, personal auto insurance net aggregates improved slightly from previous estimates, with profitability expected in 2025.

Expectations and predictions

Dale Porfiglio, Chief Insurance Officer at Triple-E, commented on the continuing performance gap between personal and commercial lines.

“This gap is narrowing,” he said. “This quarter, we expect commercial lines underwriting results to outpace personal lines premium growth by more than five points in 2024. The gap largely reflects how regulatory scrutiny of personal lines has limited insurers’ ability to raise rates to reflect the large amount of inflation that has impacted replacement costs during and after the COVID-19 pandemic.”

Jason B. Kurtz, a principal and consultant at Milliman, pointed to the long-term challenges facing commercial multi-peril insurance.

“While the projected combined net profit ratio of 106.2 points is one point better than 2023 and matches the eight-year average, the line has not been profitable since 2015,” Kurtz said. “With the first-quarter direct loss ratio of 52% and continued slowdown in premium growth, we see some improvement but continued unprofitability through 2026.”

In contrast, workers’ compensation continues to perform strongly. “The projected combined net ratio of 90.3 represents an improvement of about one point over previous estimates and would represent 10 consecutive years of workers’ compensation profitability,” Kurtz said. “We continue to expect favorable underwriting results through 2026.”

Medical costs, while rising, haven’t seen the same kind of inflation as the broader economy, added Donna Glenn, chief actuary at the National Council for Compensation Insurance. “Since 2015, both workers’ compensation severity and medical inflation, as measured by the National Council for Compensation’s Workers’ Compensation Weighted Medicare Price Index, have grown at a similar rate, 2 percent per year,” she said.

Michelle Leonard, chief economist and data scientist at Triple-I, discussed how property replacement and compensation costs are rising more slowly than overall inflation.

“Over the past 12 months, the economic drivers of insurance performance have been favorable for the industry, with underlying P&C growth catching up with overall U.S. economic growth and replacement costs rising at a slower pace than overall inflation,” Leonard said. However, this favorable window could be threatened by slower U.S. economic growth and increased geopolitical risks.

“First, US economic growth slowed more than expected in the first quarter of 2024, largely due to the Fed’s lack of clarity on the timing of interest rate cuts,” Leonard noted. “Second, global supply chains are once again under pressure due to ongoing and rising geopolitical risks, such as tensions in and around the Suez Canal. These risks could send inflation back to pandemic-era levels. Geopolitical risk never goes away and supply chains are a lifeline.”

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