Property & Casualty Insurers Report 27.5% Drop in Net Income During First Nine Months of 2020

COVID-19 and record number of catastrophes in the United States impact the industry, according to Verisk and APCIA

JERSEY CITY, N.J., Feb. 08, 2021 (GLOBE NEWSWIRE) -- In the first nine months of 2020, the private U.S. property and casualty (P&C) insurance industry dealt with the effects of the COVID-19 pandemic as well an historic catastrophe season, according to a report from Verisk (Nasdaq:VRSK), a leading global data analytics provider, and the American Property Casualty Insurance Association (APCIA).

The industry’s net income after taxes dropped 27.5 percent to $35.1 billion in the first nine months of 2020 and net underwriting gains declined to $0.3 billion, from $5.4 billion a year earlier. The deterioration in underwriting results was due, in part, to a major increase in the losses and loss adjustment expenses from catastrophes, which more than doubled to $47.1 billion for nine-months 2020 from $21.5 billion in the same nine-month period a year earlier.

Catastrophic events set a record in the U.S.

PCS, a Verisk business, reported that 2020 set a record for the number of U.S. catastrophic events. The 2020 catastrophes included 19 events with at least $1 billion in direct insured losses in the United States (17 in the first nine months), including the first riot and civil disorder event to exceed that threshold.

The United States also recorded one of the largest deteriorations on the Verisk Maplecroft Civil Unrest Index in 2020—dropping from the 91st riskiest jurisdiction in the second quarter to the 34^th by the end of the year. The index assesses the risk of disruption to business caused by civil unrest and includes a spectrum of incidents, from protests to violent mass demonstrations and rioting.

Policyholders’ surplus rose $16 billion to $863.3 billion as of September 30, 2020, from $847.3 billion as of December 31, 2019, driven by growth in the stock market.

The industry continues to face many unknowns stemming from the COVID-19 pandemic. Although the year started strong and insurers reported robust premium growth and promising underwriting results in the first quarter, the results for the remainder of the year reflect the major disruptions of daily life and the economic downturn stemming from COVID-19. It might take significant time before the insured losses directly attributable to pandemic can be reliably estimated, but the impact on premiums was immediate. Due to the economic disruption, consumers and businesses deferred and canceled large purchases and capital investments, which led to reduced premium activity. The written direct premium growth slowed to 2.3% for the first nine months of 2020 compared to 4.8% in the same time period in 2019.