Record 2011 losses are driving insurance price increases in 2012. As predicted in Market Forecast 2012, the insurance industry has been raising prices this year on Homeowners and commercial property risks, other unprofitable areas and any individual risks with more than average claims experience. The reason?
Global weather-related and catastrophic events in 2011 caused more than twice such losses for the U.S. property/casualty (P/C) industry than in 2010. The combination of these losses and increased losses in non-catastrophe-exposed lines produced nearly a $30 billion underwriting loss, almost six times the 2010 level and nearly all related to increased pure losses incurred, according to a special report by A.M. Best Co.
Contributing to the industry’s plummeting net income have been:
- Continuing weak macroeconomic conditions;
- Low investment yields;
- Volatile equity markets; and
- A reduced level of favorable loss reserve development after considering a single large reserve action in 2010.
One bright spot was growth in net premiums earned and the second consecutive year of increases in net premiums written, which helped to partially offset the effect of increased losses and expenses on the industry’s underwriting and operating performance.
Source: A.M. Best Company, News Release – May 29, 2012: A.M. Best Special Report