By: AgencyEquity.com
The U.S. property-casualty insurance industry continues to be firmly in the grip of hard market conditions. Availability of some coverages from standard insurance carriers is limited or, in some regions, non-existent. However, recent reports offer reason for hope that conditions will gradually improve.
MarketScout reported last month that rate increases in personal lines moderated in the third quarter of 2023, with a composite increase of 4%. Personal articles and homeowners for homes valued at less than $1 million were up less than that. Auto insurance premiums rose slightly faster (4.3%) and insurance for more valuable homes rose 5.3%.
Increases were even smaller in commercial lines, with the composite rate increasing 3.72%, down from 5% in the second quarter.
A November report from the Insurance Information Institute and insurer Milliman forecasted improvement in the personal lines markets each year from 2023 through 2025.
In September, California Insurance Commissioner Ricardo Lara issued a package of executive actions described as the state’s largest insurance reform in 35 years. They include new rules for reviewing insurers’ use of climate catastrophe models in rate setting; public discussions of permitting insurers to include reinsurance costs in rates; and reforms to move insureds out of the Fair Access to Insurance Requirements (FAIR) plan and back into the voluntary market. The state has experienced an exodus of homeowners carriers this year.
The California wildfire season this year has been less severe than in the last several, at least so far. That may take pressure off property carriers and encourage them to consider writing more business.
In Florida, which has experienced 10 carrier insolvencies in the last 5 years, the state legislature and governor pushed through insurance reforms late last year. The bill created a reinsurance fund, measures to reduce litigation over claims, and incentives to move property owners out of the state’s residual market.
Recently, one Florida insurer that was in runoff announced that it was exploring the possibility of re-entering the market. The CEO of another carrier that has shed 160,000 policies over the last two years recently said that the company is now planning to grow in the state.
Regulators in Texas have begun approving requests for higher rates. They approved 32 such filings for homeowners coverage just in the last quarter of 2022. Almost 100 homeowners rate increase requests have been logged so far in 2023; requests for higher auto insurance rates are more than double that. These increases should lead to greater coverage availability as they encourage carriers to write more business.
Elsewhere, insurers who have been struggling are starting to find their footing. Liberty Mutual announced a return to profitability in the third quarter after losing $585 million in the second quarter. Progressive and AIG reported substantial improvements in the third quarter. CNA said it made a $258 million profit in the quarter after losing $42 million in the previous one.
In addition, there are signs that the reinsurance market, which has been brutal for primary carriers, may improve. It was reported that reinsurers showed a renewed interest in client need at a recent conference, a turnabout from the same meeting in 2022 where the reinsurers’ needs were at the top of the agenda. One broker predicted “hard but more manageable renewals” of reinsurance contracts this January.
Investors are anticipating good results from P-C insurers. The Dow Jones U.S. Property & Casualty Insurance Index is up 7.5% so far in 2023 and 8.2% in the last three months.
There are still reasons for caution, including forecasts that the sector’s combined ratio will remain over 100 in 2023, erratic weather leading to larger catastrophe losses, and the reluctance of many regulators to approve rate relief for insurers. However, it appears that the peak of the hard market storm may have passed, and agents can look forward to markets gradually becoming easier over time.
