The 2023 net combined ratio for the property/casualty industry is forecast to be 103.9, with commercial lines at 97.7, outperforming personal lines at 109.9, according to the latest underwriting projections by actuaries at the Insurance Information Institute (Triple-I) and Milliman.

Record levels of severe convective storm losses were the single biggest driver of the overall adverse results.

Hard markets continue with 2023 net written premium growth forecast at 9 percent, the actuaries added.

The quarterly report, “Insurance Economics and Underwriting Projections: A Forward View”, was presented on Jan. 30, during a members-only virtual webinar.

Inflation, interest rates and overall economic underlying growth were key macroeconomic trends impacting the property/casualty industry’s results, said Michel Léonard, Ph.D., CBE, chief economist and data scientist at Triple-I.

“Real gross domestic product (R-GDP) in the third quarter of 2023 accelerated to 4.9 percent, but economists still expect year-over-year growth of 2.1 percent,” said Léonard, noting that for GDP, “revised Q3 numbers did not disappoint but all eyes remain on Q4.”

The consumer price index (CPI) continues to slow down to 3.1 percent as of November, but CPI, less food and energy, is still up 4 percent year over year, he added.

“Year-over-year P&C underlying growth grew 1.3 percent in 2023 and is forecasted by Triple-I to grow 2.6 percent in 2024,” said Léonard. “This is below U.S. GDP growth in 2023 and slightly above U.S. GDP growth in 2024. Year-over-year P&C replacement costs increased by 1.1 percent in 2023 and are forecast to increase by 2 percent in 2024.”

With respect to P&C industry underwriting projections, Dale Porfilio, FCAS, MAAA, chief insurance officer at Triple-I, said, “The bad news is that the 2023 Q3 incurred loss ratio for homeowners, commercial auto and commercial multi-peril exceeded our expectations, as 2023 Q3 incurred loss ratios were above historical averages.”

The industry’s bleak homeowners financial results was reinforced by the year’s net combined ratio forecast at 112.3, he said, noting it would be the worst since 2011.

Porfilio added that the 2023 net written premium growth rate of 12.4 percent is the highest in over 10 years, reflecting rate increases to offset inflationary loss costs.

“We expect personal auto and homeowners lines to improve in 2024 and 2025 but to remain unprofitable,” he said.

Commercial property and workers compensation continue to be profitable, though commercial multiperil and commercial auto remain troubled, said Jason B. Kurtz, FCAS, MAAA, a principal and consulting actuary for global consulting and actuarial firm Milliman.

“Looking at commercial auto, underwriting losses continue, with a projected 2023 net combined ratio of 110.2, the highest since 2017,” said Kurtz. “For 2023 Q3, the incurred loss ratio was the highest in over 15 years, while the 2023 net written premium growth rate of 6 percent is noticeably lower than the prior two years.”

“For commercial multiperil, the 2023 net combined ratio of 110.3 is forecast to be the highest since 2011,” he added.

With respect to workers compensation, the 2023 net combined ratio of 88.7 is in line with the five-year average of approximately 89, said Kurtz.

It’s anticipated the line will see net written premium growth of 2 percent per year from 2023 through 2025, though growth will be modest and the net combined ration should remain favorable, he said.

Rate adequacy and medical inflation are top concerns for the line.

“We’ve seen loss costs decline for 10 consecutive years,” said Donna Glenn, FCAS, MAAA, chief actuary at the National Council on Compensation Insurance (NCCI).

The strong labor market and overall economy have resulted in payroll increases outpacing loss cost declines, she said.

With respect to rising medical costs, Glenn said though costs are increasing, the rate of increase is moderate—”in the 2.5-3.5 percent range.”

The NCCI is in the process of developing a medical price index for a quarterly view into medical inflation’s impact on workers compensation claim costs to address stakeholder concerns.