The U.S. P/C insurance industry will end a 10-year run of premium growth in 2020 due to COVID-19 fallout, according to new research from S&P Global Market Intelligence.

“Factors including macroeconomic contraction, government-imposed restrictions, policyholder credits and other measures of relief related to the pandemic will combine to end the industry’s decade-long run of premium growth in 2020,” the report concludes.

S&P expects direct premiums written will decline 1.8 percent in 2020, versus growth rates that surpassed 5 percent in 2018 and 2019. What’s more, according to the ratings agency, this is only the third year-over-year decline in direct premiums written since at least 1997.

The ratings agency predicts a 100.7 combined ratio for the U.S. P/C insurance industry in 2020, following two consecutive years where the combined ratio was a bit below 100. In 2019, carriers produced a 98.9 combined ratio.

The year 2020 will be more than just one where rates decline due to short-term circumstances. Because of COVID-19, the struggles carriers are facing will likely continue for months, S&P said, testing the industry’s overall resiliency.

Here are some additional S&P predictions for 2020 and beyond:

• Personal lines direct premiums written will decline 4.3 percent in 2020, assuming credits for premium reductions based on quarantine-related driving declines.
• There will be “meaningful” upticks in policyholder dividend ratios and expense for personal lines, due in part to premium credits from less driving.
• Private auto combined ratios should average 93.1 in 2020, compared to 98.8 in 2019. In 2021, this should normalize, so the private auto combined ratio will grow to 98.7 next year.
• Homeowners insurance could face rate pressure in catastrophe-exposed markets.
• The Florida residential property insurance market might see an unusually challenging June 1 renewal period due to reinsurance COVID-19 losses in other business lines and loss-creep from 2017 hurricanes.
• Personal lines direct premiums written will dip 1.6 percent in 2020.
• U.S. insurers will help commercial lines policyholders in a limited fashion to mitigate the pandemic financial fallout, due to language in businessowners and commercial package policies.
• The commercial lines combined ratio will rise to 107.5 in 2020, a nine-year high. Thank business interruption for this, as claims in that area, workers comp, travel insurance and credit and event cancellation soar, thanks to the pandemic.
• Commercial multiperil insurance will see an “elevated combined ratio” in 2020 due to cases “where business interruption is not fully precluded and additional costs associated with litigating a heavy volume of claims.”
• Workers comp direct premiums written will drop 12.4 percent in 2020, due to layoffs, worker compensation category changes and downward pressure on premium rates. This comes after a number of years of “highly favorable underwriting results.”

The full S&P Global Market Intelligence analysis is: COVID-19 to test U.S. P&C insurance industry’s resilience in 2020 and beyond.”

Source: S&P Global