Higher private passenger auto insurance losses in 2015 will end a two-year run of property/casualty personal lines insurance profitability. Rather than being a fluke, however, the trend will continue over the next few years, SNL Insurance predicted in a new industry outlook report.
Also predicted: an uptick in the commercial lines combined ratio. While there are some trouble spots, that sector is in better condition overall than its personal lines counterpart, SNL stated.
SNL said it expects a personal lines combined ratio of 100.2 for 2015, after two years that the number has landed below 100, a level considered healthy for the industry.
That spike will come with “as deteriorating loss experience in the private-passenger auto business offsets a continuation of the recent strong results for the homeowners line, assuming a relatively normal catastrophe load,” the SNL report concluded.
According to SNL, the personal lines combined ratio varied from a low of 94.1 in 2006 to a high of 107.8 in 2011 (the scope of SNL’s analysis).
SNL said the average annual combined ratio for personal lines from 2015 should hit 100.6 from 2015 through 2019. That’s consistent with the 10-year historical mean, but below the five-year mean of 102.2.
At the same time, SNL also predicts an uptick in the commercial lines combined ratio. SNL said commercial lines should generate a 95.4 combined ratio for 2015, or 96 when excluding financial and mortgage guarantee lines. As SNL noted, this would reflect the third consecutive year of underwriting profitability for the sector.
But there are some trouble spots.
SNL projects “declining, but positive underwriting margins” for commercial lines.” That comes, in part, from “an expectations for a reversion to the mean in incurred losses,” plus relatively steady underwriting expense levels versus annual net premiums written.
With that said, SNL expects more pressure on underwriting results in liability lines such as product liability and workers compensation (blame slower premium growth rates). As well, SNL said that commercial auto results could “remain challenged, as evidenced by projected combined ratios several percentage points above 100 annually from 2015 through 2019.” Medical professional liability losses will also grow and adversely affect the numbers, SNL said.
All told, SNL said the average annual commercial lines combined ratio from 2015 through 2019 of 96.5 compares favorably to the historical five-year and 10-year averages of 100.1 and 99.3, respectively. That 96.5 number lands well above the mean of 92.5 for the 2006, 2007, 2013 and 2014 calendar years, however. Those years stand out because insurers saw huge upticks in catastrophe losses, and also established large builds in reserves for expenses such as decades-old asbestos/environmental exposures.
These are other forecasts are part of the 2015 SNL report: U.S. P&C Insurance Market Report.
Source: SNL Insurance/SNL Financial