US Property & Casualty outlook: Ukraine conflict adds to inflation pressures and specialty lines risks
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The conflict in Ukraine will likely have mostly indirect but still significant effects on US P&C insurers over the next 12-18 months. With rising inflation, direct claims exposures in some specialty lines and ongoing economic uncertainty, rate hardening momentum is set to continue, and we raise our estimate for 2022 direct premiums written (DPW) growth to 8.0%. However, on the profitability front, we lower our ROE estimate to 4.5%. Surging commodity prices and supply disruptions have pushed up economic inflation and boosted claims severity.
Key takeaways
- The Ukraine conflict has raised inflation pressures and brought cyber risk to the fore.
- Profitability pressures in US P&C remain as inflation shocks outpace rate increases; moderately higher reinvestment yields will only partially offset the inflation impact.
- We lower our 2022 ROE forecast to 4.5% and see modest improvement to 6.0% in 2023.
- Premiums will grow by an estimated 8.0% in 2022 and 6.3% in 2023 as rate hardening momentum continues in response to inflation and new risks.
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