Recent reports show that the property and casualty insurance industry is in better shape than many had predicted. Despite fears of a collapse due to climate-related disasters, the financial results for 2024 indicate strong performance. The industry posted a combined ratio of 96.6%, a significant improvement from the previous year’s 101.8%. This ratio measures losses and expenses against premium income, and a figure below 100% suggests profitability.
In 2024, the total direct written premium reached $1.05 trillion, up from $969 billion in 2023. This growth is notable, especially considering that 2024 was marked by severe hurricanes, specifically Helene and Milton, which caused $95 billion in damages. The industry’s ability to remain profitable despite these challenges has surprised many analysts.
The breakdown of the numbers reveals some interesting trends. The amount of premium coming from personal lines, such as auto and homeowners insurance, has risen to 51.4% of the total, up from a typical 47%. This shift is largely due to significant rate increases in these areas, which have outpaced those in commercial insurance.
Another highlight from the financial report was the $79 billion in realized capital gains, primarily from Berkshire Hathaway’s sale of Apple stock, which contributed greatly to the industry’s bottom line. This sale was part of a broader strategy that has seen Berkshire Hathaway enjoy a nearly 800% return on its Apple investments since acquiring them.
Despite the positive financial results, concerns linger about the future. The upcoming Trump administration could bring changes that impact the insurance sector, particularly with job cuts at the National Oceanic and Atmospheric Administration (NOAA). NOAA provides critical data on weather and climate patterns that insurers rely on to assess risks and set premiums.
Additionally, the presence of trial lawyers in key positions within the administration raises questions about potential increases in litigation, which could affect liability insurance costs. Historical patterns suggest that litigation could become a more significant issue for insurers.
Overall, the insurance industry demonstrated resilience in 2024, with investors showing confidence in its management. The S&P Composite 1500 Property & Casualty Insurance Index has reported a 7.52% return this year, reflecting a stable outlook amid broader market volatility. However, industry insiders are keeping an eye on potential turbulence ahead as the political landscape evolves.