The U.S. property and casualty (P&C) insurance industry is celebrating a significant turnaround, reporting an estimated $170 billion in net income for 2024. This figure, released by Verisk and the American Property Casualty Insurance Association (APCIA), marks a notable recovery from previous years, particularly after the industry faced challenges in 2023.
Excluding over $70 billion in capital gains from one insurer, the adjusted net income stands at about $100 billion. The industry also saw an underwriting gain of $24.8 billion for the year, a significant improvement compared to the underwriting loss of $21.2 billion in 2023. This is the first full-year underwriting gain since 2020, showing a positive shift in the sector’s financial health.
The improvement in 2024 can largely be attributed to premium increases that better matched the risks insurers faced. Saurabh Khemka, co-president of underwriting solutions at Verisk, noted that while some of the loss factors from 2023 persisted, pricing adjustments helped stabilize the market.
Despite these gains, 2024 was still the second most expensive year for catastrophe losses since 1950, driven largely by hurricanes and severe storms. Hurricane Milton and other late-season events significantly increased claims in the last quarter of the year, which were up 113% compared to the same period in 2023.
Looking back, 2023 was a tough year for the P&C sector, which recorded a net underwriting loss of $21.2 billion, mainly due to severe weather events, inflation, and rising reinsurance costs. These challenges led to the worst underwriting loss in a decade, with substantial insured losses from hurricanes and wildfires impacting profitability.
In 2024, total written premiums reached $926 billion, up from $851 billion in 2023. The growth in earned premiums was slightly lower than the previous year but still marked an upward trend. Incurred losses and loss adjustment expenses rose by only 1.9%, a significant reduction from the 10.1% increase seen in 2023. The industry’s combined ratio improved to 96.4%, down from 101.6% the previous year, indicating a healthier balance between premiums earned and claims paid.
However, not all news is positive. Robert Gordon from APCIA warned that homeowners insurers might face seven consecutive years of underwriting losses by the end of 2025, citing ongoing risks from events like the California wildfires.
In the second half of 2024, the industry reported a net underwriting gain of $21 billion, a stark contrast to the $3.8 billion gain in the first half of the year. This improvement was also reflected in the net written premiums, which rose by $29.8 billion, a 6.9% increase compared to the previous year.
Overall, while the P&C insurance industry has made significant strides in 2024, the challenges of severe weather and rising costs still loom large, reminding stakeholders of the ongoing need for vigilance and adaptability in the face of changing conditions.