Personal Lines Driving P&C Growth, Commercial Lines Mixed

Swiss Re reports that the U.S. P&C insurance market is seeing improved results, but commercial lines faces pressure to boost margins.
By: | April 24, 2024
Topics: News
financial results

The U.S. property and casualty (P&C) insurance industry is gaining momentum as strong premium gains, easing claims cost inflation, and higher investment returns boost industry results after a challenging period, according to a new report from Swiss Re.

Personal lines are expected to drive improved profitability in the P&C sector, and the gap between personal and commercial lines underwriting results is already starting to narrow, the report finds.

“Personal lines will be the key positive driver,” the report’s authors stated. The direct loss ratio for personal lines was 74.1% in 2023, while the commercial lines loss ratio was 56.8%. “But the gap started to narrow in the second half,” the report said.

Improved underwriting results are expected as rate increases outpace claims costs. In the fourth quarter of 2023, P&C net premiums earned increased by 12%, while net claims incurred rose by only 2%, noted Swiss Re, which said it expects this differential to persist in 2024.

Personal auto insurance has seen significant inflation; the motor vehicle insurance component of the U.S. Consumer Price Index (CPI) reached 22.2% year-on-year in March. However, this figure may overestimate the average increase paid by consumers, the report said. Homeowners’ insurance premiums have also experienced strong growth, contributing to the overall P&C industry growth in direct premiums written (DPW) of 9.3% in 2023.

In contrast, commercial lines have shown a bifurcated performance with strong property growth offset by weak liability insurance growth.

“Commercial lines face margin pressures after a period of relatively favorable underwriting experience on a calendar-year basis, but results remain strong so far,” according to the report. Unfavorable reserve development in commercial auto and general liability lines has also been a concern, but it has been offset by workers’ compensation reserve releases, the report noted.

Commercial lines growth is weakening as rate increases subside, Swiss Re said. There was a 6.4% gain in commercial lines DPW in 2023, down from nearly 10% in 2022.

Fire and allied lines property DPW grew by 15.5% year over year, and commercial multi-peril was up 12.2%, but liability premiums were roughly flat, the report said. Growth of 5.6% in occurrence liability DPW was offset by shrinking claims-made liability DPW, which declined 6.3%.

Looking ahead, the P&C insurance industry outlook remains positive, according to the report.

Swiss Re forecasts P&C insurance DPW growth of 8.0% in 2024 and 5.0% in 2025. The industry’s return on equity (ROE) is projected to reach 9.5% in 2024 and 10.0% in 2025, close to the cost of capital of between 10 and 11%.

Investment income is expected to benefit from higher yields and potential Fed rate cuts, with investment yields rising to 3.7% in 2024 and 4.1% in 2025, the report projected. This is in comparison to 3.5% investment yields in 2023.

To view the complete report, visit Swiss Re website. &

The R&I Editorial Team can be reached at [email protected].

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