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Why One Insurance Industry Suffered a Historic Low

According to an analysis from S&P Global Market Intelligence, the property and casualty insurance industry has suffered its first and most significant underwriting loss in 12 years. U.S. property and casualty insurers suffered a net underwriting loss of $7.34 billion in the first quarter of 2023.

The largest net underwriting loss for an individual property and casualty company came from State Farm Mutual Automobile Insurance Co. It lost $2.87 billion. Similarly, Kentucky Farm Bureau Mutual Insurance Co. Inc. reported its largest net underwriting loss in any quarter since 2001.

The Effects of Mother Nature

According to S&P Global Market Intelligence, Mother Nature played a significant role in the historic amount of losses. The analysis found that natural disasters occur more frequently than in past years. They are also resulting in more destruction and losses. In 2022, there were more than 1,300 tornadoes in the United States. The most expensive natural disasters were Hurricane Ian and the U.S. drought/heat wave with the former resulting in $112.9 billion in losses and the latter with $22.1 billion. Another major factor was the number of wildfires that occurred. According to the Congressional Research Service, there were close to 70,000 wildfires that burned 7.5 million acres of land.

To fully understand the losses, you must also consider how the percentage of money lost compared to money earned in the homeowners and private auto insurance sectors increased. Homeowners’ lines of insurance saw a loss ratio of 71.9 percent compared to 53.9 percent in the previous year. This had a significant contribution to the industry’s financial deficit.

Rates and Premiums Weren’t Enough

The auto market saw a loss ratio of 79.8 percent higher than the previous high of 70.9 percent. In 2021, the loss ratio was 68 percent. The reason for this change was because of rising costs between private auto physical damage and liabilities coverages. Even though some auto insurance providers raised their rates and premiums, it was not enough to cover the higher number of claims that were filed in 2022. One prediction from insurance experts notes that insurance providers should be able to break even in 2024.

Protection When You Need It

COBIA Insurance Agency can help you with your insurance needs. We offer insurance options for your home, vehicles, businesses, and more. We are committed to making sure you have the best coverage and protection.

Since 2018, our team has partnered with Acrisure, one of the world’s leading insurance brokers. With this partnership, we have gained new access to technology and resources that allow us to better serve our clients.
Please contact us to learn more about our premium insurance solutions available to you.

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