The property and casualty (P&C) insurance industry published financials for the second quarter (Q2) of 2020, which show a decline in net premium mainly attributable to COVID-19, reversing the growth the industry has experienced in recent years. The premium decline was accompanied by a slightly more than offsetting decrease in incurred losses and other underwriting expenses, resulting in a P&C industry combined ratio in Q2 2020 of 99%, a one-point improvement over the prior year.
The industry annual net premium growth for the past five years has averaged 5%. This growth has been, at least temporarily, halted by the pandemic. The aggregate industry net earned premiums for Q2 2020 are $12 billion lower than those for Q1 2020. The net incurred losses, loss adjustment expenses, and other underwriting expenses also decreased between Q1 and Q2.
Milliman professionals discuss the Q2 2020 results more fully in this article.
Property and casualty (P&C) insurance headlines these days generally focus on issues relevant to current policies. Although not receiving as much attention, historical accident years have also been experiencing deteriorating trends, both for mature exposures such as asbestos, environmental pollution, and construction defect claims as well as for emerging exposures related to talc, sexual abuse, and opioid litigation.
Understanding the impact of these potential legacy losses is important, not only in the context of establishing an appropriate reserve, but also to form a view of the load for mass torts needed for pricing current policy years. Very often insurance companies segregate these mass tort claims, housing them in discontinued operations, ceding such exposures as part of adverse development covers or simply removing them from actuarial analyses to prevent them from “distorting” the analyses of the “normal” claims.
In this article, Milliman’s Raji Bhagavatula, Mark Goldburd, and Jason Russ discuss a number of these “legacy” topics that affect the general liability books of commercial insurance companies.