Property & Casualty Insurance Carriers

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 2,400 property and casualty insurance carriers in the US underwrite insurance policies that protect policy holders against losses that may occur as a result of property damage or liability. Major types of policies include vehicle property and liability; property and liability; and general liability. Other types of policies sold include health, life, and accident insurance. Large firms may offer reinsurance policies, which limit the amount insurers can lose.

Uncertainty Related to Risk and Losses

Success in the property and casualty insurance business is dependent on a firm’s ability to underwrite and price risk accurately and estimate losses.

Natural Disasters and Other Catastrophes

Damage and destruction due to natural disasters and other catastrophes expose property and casualty insurers to the financial burden of covering massive losses.

Industry size & Structure

The average property and casualty insurance carrier employs about 238 workers and generates $231 million annually.

    • The property and casualty insurance industry consists of about 2,400 firms that employ 571,000 workers and generate almost $555 billion annually.
    • The industry is highly concentrated; the top 50 companies account for about 82% of industry revenue.
    • Large firms include State Farm, Berkshire Hathaway, and Liberty Mutual.
                                Industry Forecast
                                Property & Casualty Insurance Carriers Industry Growth
                                Source: Vertical IQ and Inforum

                                Coronavirus Update

                                Apr 29, 2022 - Pandemic Prompted Coverage Adjustments
                                • The coronavirus pandemic has had a major impact on three phases of property and casualty insurance: property coverage, workers’ compensation coverage, and the marketplace stance on COVID-19 moving forward, according to Peter Jacavone of insurance brokerage firm Starkweather & Shepley. “Carriers have added broader exclusions to their policies to show that COVID-19 is an excluded cause of loss moving forward,” Jacavone said. “For example, most carriers on profitable clients are still looking for a larger premium increase on good accounts. This is very similar to what is happening in the housing market, with inflated pricing across the line.” Cyber risk has also increased thanks to a largely remote workforce. “We see more demanding requirements from carriers to offer cybersecurity coverage,” Jacavone said. “One example would be multi-factor authentication for all company users. I believe that the insurance market will take some time to rebound moving forward.”
                                • Small business owners who thought that pandemic-related losses would be covered by business disruption insurance have mostly discovered otherwise. Some insurers inserted clauses excluding coverage for “loss due to virus or bacteria” a few years after the SARS outbreak, according to the Philadelphia Inquirer. Several states – including New York, Oregon, Pennsylvania, Rhode Island, and Washington – have introduced legislation to prevent insurers from denying business interruption claims resulting from COVID-19-related losses. None of the proposed state-level legislation passed, according to Moody’s Investor Service.
                                • More than 2,200 COVID-19-related business interruption insurance lawsuits had been filed in the US by March 14, 2022, according to the COVID Coverage Litigation Tracker (CCLT) maintained by the University of Pennsylvania’s Carey Law School. Insurers have secured motions to dismiss more than 95% of COVID-19-related business interruption lawsuits in federal courts, according to the CCLT. More than 75% of cases in state courts have been dismissed. Many of the dismissed cases involved policies with virus-specific exclusions. A fresh wave of business interruption suits involving larger companies could signal a shift, however. Large firms often have tailored policies that don’t include the virus-exclusion clauses that are typically sold to smaller businesses, according to The Wall Street Journal.
                                • Insurers are raising premiums to cope with increasingly severe accidents and ballooning inflation, according to The Wall Street Journal. Many firms offered car insurance customers rebates and discounts early in the pandemic amid less driving and fewer accidents. Insurers’ margins are shrinking as higher vehicle values boost the cost of repairs and replacement. Shortages of new vehicles have driven up rental car rates, which increase insurer costs for policies that provide rentals to drivers whose cars are being repaired. Allstate plans to raise rates by an average of 7.1% across 25 states, and some firms are aiming for double-digit increases. However, in some states, rate hikes are subject to approval by state regulators before being imposed on consumers. Consumer prices for new cars and trucks were up 12.2% in January compared to the same month a year earlier.
                                • The pandemic hastened the use of web-based meeting tools as agents worked from home. As insurance companies move to reduce fixed costs, some firms are rethinking their real estate footprints. In early 2022, State Farm announced it planned to fill more than 3,000 full- and part-time jobs and that many of the positions would offer hybrid work arrangements. A State Farm spokesperson said the company had no plans to transition back to full-time in-office work for most employees.
                                • Increased prices for cars and housing are affecting property and casualty insurance firms in the form of higher loss costs, according to the American Property Casualty Insurance Association (APCIA). Insurers’ premium increases have not kept pace with the rate of inflation. Private property and casualty insurers saw a collective $11.3 billion in underwriting losses in the third quarter of 2021, according to a March report by the APCIA. Incurred losses and loss adjustment expenses rose nearly 18% in Q3 2021 compared to a year earlier. However, auto premiums only increased 3.1% and homeowner premiums grew 8.4%.
                                • US driving activity is rising but is not back to pre-pandemic levels. US commuters lost about 36 hours to traffic congestion in 2021, 10 more than they lost in 2020, but about 63 fewer hours than they lost in 2019, according to a December report by transportation analytics from Inrix. Auto insurers Progressive and GEICO reported double-digit increases in claims frequency in the first six months of 2021 compared to 2020. Increased severity of accidents and vehicle price inflation has increased the number of total losses, which can hurt insurance firm margins.
                                • Credit rating agency AM Best upgraded its outlook for the US commercial property and casualty insurance segment from negative to stable in December 2021. The revised outlook was primarily due to the modestly negative impact of the pandemic on insurer performance in 2020 and the first three quarters of 2021. The outlook was improved for several commercial insurance segments, including commercial property, workers’ compensation, and surety. Tthe pricing environment across the commercial property and casualty sector has been robust except for workers' compensation. AM best was also encouraged by insurers faring well in pandemic-related business interruption litigation and insurance firms’ successfully adapting during the pandemic through technology, innovation, and product design.
                                • Russia’s invasion of Ukraine could increase the risks of cyberattacks and insurers should reassess their potential exposures, according to CyberCube. Insurers also face claims risks in the event of cyber-physical attacks on critical infrastructure. CyberCube recommends that insurers and re-insurers, especially those with significant books of business in Eastern Europe, stress-test their portfolios. However, CyberCube suggests companies in countries that have imposed sanctions on Russia – which include the US, EU countries, the UK, and Japan – are at increased risk of retaliatory Russian cyberattacks. Property and casualty insurers that offer cyber coverage also face the increased potential for higher claims costs, according to Fitch Ratings. Most cyberattack coverage is underwritten in North America.
                                • Ratings for the US property/casualty insurance industry returned to pre-pandemic levels in 2021 as firms shored up balance sheets and operating results improved, according to ratings agency AM Best. The number of ratings upgrades rose to 54 in 2021 compared to 38 in 2020, despite ongoing industry challenges including COVID-19-related impacts, inflation, and higher loss costs.
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