Industry Performance Overview
In a remarkable turnaround, the US property and casualty insurance sector is projected by Verisk, a leading provider of data analytics and technology solutions, alongside the American Property Casualty Insurance Association (APCIA), to have achieved an impressive $170 billion in net income for 2024. However, this figure adjusts to approximately $100 billion when accounting for over $70 billion in capital gains realized by a single insurer, a significant leap from 2023’s $40.9 billion.
Key Financial Metrics
Verisk’s report underscores significant improvements in several critical areas. The sector reported an underwriting gain of $24.8 billion in 2024, a stark contrast to the $21.8 billion underwriting loss in 2023. This marks the first full-year underwriting gain in four years, highlighting an industry-wide initiative to better align premiums with the risk levels insurers face.
Insurance companies wrote $926 billion in premiums in 2024, an increase from $851 billion the previous year, while earned premiums rose by 9.8% to a total of $895 billion, sustaining the growth trend from the prior year. The combined ratio, an essential measure of profitability, improved significantly, dropping from 101.6% in 2023 to 96.4% in 2024.
Growth and Challenges
Net written premiums surged by $29.8 billion in the second half of 2024, reflecting a 6.9% growth compared to the same timeframe in 2023. Meanwhile, the policyholders’ surplus increased to $1,082 billion by the end of 2024, up from $1,013 billion at the close of 2023.
Despite facing natural disasters such as Hurricanes Helene and Milton in the latter half of 2024, the industry demonstrated robust growth. Incurred losses and loss adjustment expenses rose to $634.4 billion from $622.4 billion in the previous year.
Investment Gains and Future Outlook
The industry also saw substantial gains in investments, generating net investment gains of $163.6 billion, a significant improvement over the previous year’s $73.4 billion. “While many of the loss drivers of 2023 persisted into 2024, the industry’s ability to bring premiums closer to necessary levels has resulted in an underwriting gain for the first time since 2020,” stated Saurabh Khemka, co-president of Underwriting Solutions at Verisk.
However, Khemka cautioned that the broader market still faces challenges, particularly in property coverages affected by natural catastrophes. The increasing frequency and severity of these events reflect evolving weather patterns and risk landscapes, underscoring the increasing complexity of underwriting in the property/casualty space.
Catastrophic Losses and Market Adjustments
Last year was the second worst for catastrophic losses since 1950, with most damages stemming from hurricane and convective storm activity. Hurricane Milton, along with a series of late-season storms, drove fourth-quarter catastrophe claims to surge 113 percent higher than the same period in 2023, highlighting both the volatility and financial strain insurers face, Khemka added.
On a more positive note, personal auto demonstrated improvements due to necessary premium adjustments within personal lines. While commercial auto premiums followed a similar trend, their growth rate did not match the levels seen in 2023. These shifts indicate a market recalibrating in response to prolonged underwriting losses, but with ongoing uncertainty, carriers will need to balance pricing, risk selection, and claims management strategies to sustain profitability. Looking ahead, insurers will continue to rely on technology that enhances data-driven decision-making and underwriting accuracy.
APCIA’s Insights and Concerns
“The property casualty insurance industry continued to stabilize in 2024, with a swing from nearly a $22 billion net underwriting loss to almost a $25 billion net underwriting gain,” said Robert Gordon, senior vice president, policy, research, and international at APCIA. “By this time next year, homeowners insurers will likely report seven consecutive years of net underwriting losses, including record insured losses caused by the California wildfires this January. Personal auto insurance loss ratios improved in 2024 but continue to be impacted by rising inflation and legal system abuse, and proposed tariffs could result in an estimated additional $7-24 billion in annual auto insurance claims costs.”
Gordon further noted that insurers significantly increased loss and loss adjustment reserves at the end of 2024 to reflect escalating adverse development due to worsening legal system abuse and social inflation. Insurers are also deeply concerned about the market impact of pressures in California to retroactively change claims settlement standards for contents and expand coverage standards for wildfire smoke in an already extremely distressed homeowners insurance market.
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