U.S. P&C re/insurers suffer record $53bn cat loss in 2017: A.M. Best

According to data from rating agency A.M. Best, the United States property & casualty insurance and reinsurance sector suffered a record level of losses from the 2017 catastrophe events, with insured losses of roughly $53 billion driving the sector to an underwriting loss of $23.5 billion for the year.

A.M. Best’s data on the performance of the U.S. P&C sector is based on preliminary results, but the agency said it represents 96% of the total P/C industry’s net premiums written, so is a relatively comprehensive assessment of the impact of 2017 catastrophe events.

The insured catastrophe losses suffered by the P&C sector in 2017, of $52.9 billion, represents a 109.8% increase over the prior year and is significantly higher than the previous industry record for estimated insured losses of $41.9 billion, that A.M. Best recorded in 2011.

Incurred losses and loss adjustment expenses rise significantly as well, up 8.5% from 2016 according to the rating agency, more than offsetting the 3.5% increase in net premiums earned and driving the overall net underwriting loss to $23.5 billion in 2017, up from the $5.5 billion loss of 2016

These catastrophe losses contributed an estimated 10% to the industry combined ratio, up from a 4.9% catastrophe burden in the prior year.

That resulted in an industry combined ratio of 103.8% for 2017, up 3% from 2016 and now the worst combined ratio of the last five years.

However, the results could have been significantly worse for the U.S. P&C sector, had it not been reserving prudently in recent years.

This was evidenced by a huge amount of reserve benefits in 2017, with a huge $13.3 billion of favorable reserve development reported in 2017 by A.M. Best, up by $10.3 billion over the favorable reserve development it saw in 2016.

Without this favourable reserve development the P&C sectors combined ratio could have been as high as 106.3%, which would have worsened the underwriting loss considerably.

Reinsurance will also have helped significantly, helping the insurers to report greater profits than they would have without this added protection. A.M. Best’s data does not go into gross versus net claims figures, but it’s safe to assume that a significant percentage of the catastrophe losses suffered were passed on to reinsurance and alternative capital providers.