US Property & Casualty outlook: claims inflation to sustain rate momentum and growth through 2022
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We expect US P&C insurers to adjust rates as the sector faces profitability headwinds in 2H21 from above-average catastrophe losses and higher claims severity due to a broadening surge in inflation. Still robust rate gains in commercial lines have started to stabilize after few quarters of deceleration and rate filings in personal auto have accelerated. Total P&C premium growth reached its highest point in over a decade in 2Q21, driven by the economic rebound and comeback from the lows of the prior-year quarter. We raise our 2021 premium growth estimate to 9.0%, and expect growth to remain strong next year (7.6%) as insurers raise rates to offset higher claims inflation.
Key takeaways
- 2Q21 ROE of 7.4% and DPW growth of 11.8% were boosted by one-off factors, including capital gains and DPW base effects.
- We expect rate increases in excess of claims costs to offset a slightly less favorable investment result in 2022.
- We estimate full-year 2021 ROE of 6.2%, and forecast the same for 2022 as higher net income is offset by a larger policyholder surplus.
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