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P&C industry 2021 CR at estimated 101% amid rate and profitability pressures: Triple-I/Milliman

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Cat losses and uncertainty from Covid will continue to pressure P&C rates, pushing the industry to run at an estimated combined ratio of 101% for 2021, according to the latest underwriting projections by actuaries at the Insurance Information Institute (Triple-I) and Milliman.

The projections are slightly worse than what was predicted three months ago, pressuring industry rates and profitability, a report from Triple-I and Milliman found.

“The 2021 estimated combined ratio worsened from prior quarterly analysis, primarily because actual third quarter catastrophe losses exceeded expectations,” explained Triple-I’s chief insurance officer, Dale Porfilio.

“Healthy premium growth is projected for 2021-2023 as a result of economic recovery and a hard market,” Porfilio said, noting, however, that “insureds will continue to face rate pressure from the uncertainty of the pandemic”.

On personal auto, which has been struggling with spiking frequency and rising costs due to the supply-chain crisis, Porfilio noted that the number of miles driven has returned to pre-pandemic levels, but riskier driving behaviors have led to increased fatalities.

“Loss pressures forecast for 2022 and 2023 will likely result in a return to pre-pandemic profitability levels,” he said.

Jason Kurtz, a principal and consulting actuary at Milliman, said the hard market persisted in the third quarter, particularly in commercial product lines.

Looking at workers' compensation, Kurtz said underwriting profits will continue, although margins are shrinking.

“The pandemic recession significantly impacted premium volumes, but we are finally seeing premium growth again with the economic recovery,” he said.

On the commercial auto side, underwriting losses are forecast to continue through 2023, said Dave Moore, CEO at Moore Actuarial Consulting.

“We believe social inflation is playing a role in these combined ratios remaining above 100% despite many successive years of steady rate increases,” Moore said. “We continue to observe a significant rebound in premium growth due to the economic recovery and the hard market driving rate increases.”

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