U.S. auto lines to pressure near-term p&c industry underwriting results: report

Personal and commercial auto insurance lines in the United States are expected to help trigger modest erosion in underwriting profitability in 2015, suggests a new report from Virginia-based SNL Financial.

“Higher losses in the private-passenger auto business threaten a two-year streak of underwriting profitability in the personal lines sector,” notes a statement Monday announcing the release of the company’s property and casualty outlook for 2015 through 2019. The report, representing the company’s inaugural industry projections, is based on a 10-year historical review and uses SNL Financial’s proprietary industry aggregates and rates data.

SNL Financial projects that the personal and commercial auto lines will see robust levels of premium growth in 2015 as several large carriers implement rate increases to address rising losses, notes the company, a provider of financial information on more than 6,500 public companies and 50,000 private companies, which has office locations in North America, Europe and Asia-Pacific.

That said, “the benefits from those actions may not fully take hold until 2016 when SNL projects that underwriting profitability will begin to improve in those lines,” the company cautions.

The report projects a personal lines combined ratio of 100.2% for 2015, with the company pointing out these ratios have been below 100% since 2013. “The projected commercial lines combined ratio of 95.4% would mark an increase from the industry’s 93.3% result in 2014,” SNL Financial adds.

“Achieving strong underwriting results is particularly important for P&C insurers in the current environment as low interest rates continue to pressure yields on investment portfolios,” the company reports.

“Softening in prices across many commercial lines of business may be mitigated by macroeconomic factors, resulting in lower, but still positive, premium growth,” suggests U.S. P&C Insurance Market Report author Tim Zawacki. “Recent improvements in homeowners profitability could result in a continued slowing of rate increases in that business line, but rising losses may lead auto insurers to push for additional hikes for consumers and businesses, alike.”