A.M. Best's market report published an article titled "U.S. Property/Casualty Insurance Industry 2018 Review and Outlook," projecting that, affected by catastrophes, the U.S. property insurance industry would post an underwriting loss for the second consecutive year, with the U.S. combined ratio rising from 100.9% in the prior year to 105.1% in 2017.

       The report projects total underwriting losses of $29.3 billion in 2017, compared with only $6.5 billion in 2016. This will cause the U.S. property/casualty industry's pre-tax profit margin to fall from 7.8% in 2016 to 2.7%. However, partly because higher underwriting losses reduced corporate tax payments, the decline in realized capital returns was narrowed by 37.7%, falling from $42.2 billion in 2016 to $26.3 billion.

        Overall, earnings grew 2.5% in 2017, down 4.3 from 2016, the second-slowest growth rate of the past five years. A.M. Best expects earnings growth of 2.0% in 2018, driven by lower underwriting losses and moderate growth in investment income.

        Catastrophe losses rising above historical averages had a broad impact on the industry, although a strong capital base allowed most primary insurers and reinsurers to maintain their risk-bearing capacity despite declines in operating revenue and net income. Some market observers and participants predicted that these losses would tighten the reinsurance market and eventually affect the primary market. However, the January 2018 reinsurance renewals showed that this prediction did not match reality. Rates on loss-affected accounts rose substantially, but most companies expected reinsurance pricing to remain flat or increase only slightly.

        In 2018, A.M. Best expects many lines nationwide to maintain single-digit growth. Property rates will depend on 2017 catastrophe losses and risk exposures. Commercial and personal auto liability lines, affected by adverse development in prior years, will see rates rise by around the mid-single digits.

        A.M. Best expects stable development of personal and commercial lines in 2018, with a negative outlook for the U.S. and international reinsurance markets.

Source: A.M. Best