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Full-year net income for U.S. property/casualty insurers increased slightly to $61.9 billion from $60.3 billion in 2020, but the industry turned in a $3.8 billion underwriting loss in 2021.

The P/C industry had posted a $5.2 billion underwriting gain in 2020. But in 2021, earned premium growth of 7.4 percent to $685 billion was offset by an 11.1 percent increase in losses and loss adjustment expenses (LLAE), according to a report from Verisk and the American Property Casualty Insurance Association (APCIA).

“Insurers’ combined ratio increased to 99.6 (from 98.6), and investment yields dropped to their lowest level since at least 1960,” said Robert Gordon, senior vice president, policy, research & international for APCIA, in a statement.

The industry reached a milestone in 2021. Policyholder surplus increased $122.5 billion on nearly $110 billion in investment gains to push year-end policyholder surplus to more than $1 trillion for the first time in history, said Verisk and APCIA. Gordon said some of the gains “may have already significantly deteriorated with the strong headwinds in the bond and equity markets in early 2022.”

“This capital cushion bolsters insurers’ ability to respond to future claims as well as looming uncertainties in capital markets, global political risks and record inflation,” said Neil Spector, president of underwriting solutions at Verisk.

Gordon added: “While the industry balance sheet is strong enough to meet the commitments to insureds, it is facing emerging challenges from the significant and increasing impact of catastrophic weather events, cyber risk and significant price and social inflation/lawsuit abuse.”

All four quarters of 2021 recorded strong growth in net written premiums—4.9 percent in Q1, 10.3 percent in Q2, 12.8 percent in Q3, and 8.9 percent for Q4 (comparing results from the previous-year quarter).