An abundance of capital from a wide range of sources coupled with evolving catastrophe risks and an extended period of low interest rates, are increasing the pressure on the property & casualty (P&C) industry to continue to increase its focus on underwriting. As such, business models for insurance companies have been progressing and the pace and opportunity associated with data, information, and technology have influenced how risk is analyzed, selected, distributed and mitigated against the insurance equation of rate, exposure and capital, according to Thomas Hettinger, Managing Director, Strategic Advisory, Guy Carpenter.
A broad array of insights are identified in Guy Carpenter’s Risk Benchmarks Research 2019 report, the newest component of our ongoing insurance benchmarks research project, which accumulates and interprets United States P&C insurance statutory financial data, through a lens of robust analytics on risk and performance. This year’s report discerns market trends to help clients in their strategic decision-making and review of critical metrics. Results by segment and business model emphasize the pressure companies are under to generate profitable returns.
Today, companies need to evaluate their business models around distribution, underwriting, pricing, and risk mitigation to separate from their competitors. Higher loss cost trends in several long-tail lines, and accumulation of losses from recent extreme weather events, are forcing carriers to reassess risk. Increased exposure to catastrophes and competition in personal auto, system and technological upgrades and outlays, medical inflation and social inflation are creating both challenges and opportunities.
A deeper dive into the United States insurance industry results over the past three years shows opportunities around pockets of volatility and profitability at a refined segment level. Each segment has had to wrestle with specific challenges in managing the capital needed to support risk. Some notable examples include: over the past three years, Large Mutuals have experienced catastrophe influences on homeowners in addition to significant competition in personal auto that began to shore up in 2018, due to their use of advanced analytics strategies following four years of poor results. Western Regionals felt the pain of wildfires – a once underestimated catastrophe peril. Large Commercials had to manage across the volatility of primary and excess liability covers that have come under pressure from rising social inflation and a surge in attritional large property losses. These trends have been particularly hard felt among non-admitted writers.
