Fitch Ratings –
Chicago/New York-30 June 2022: Following a decade of annual underwriting losses, the U.S. commercial auto insurance segment posted a below 100% combined ratio (CR) in 2021 and is positioned for similar results in 2022 supported by favorable earned premium growth and better reserve development. However, performance may be unsustainable in 2023 and beyond amid diminishing price increases, as loss costs inexorably move higher, with higher U.S. inflation likely to place upward pressure on key inputs such as vehicle repair, medical, and litigation costs, Fitch Ratings says.
The broader U.S. commercial lines sector has experienced hardening pricing for three years, but improvement in results, customer fatigue and competitive forces are reducing rate momentum. Commercial auto renewal premium rates have risen for 43 consecutive quarters, per the Council of Insurance Agent & Brokers (CIAB) Quarterly Commercial Market Pricing Survey. However, the rate of increase fell to 5.9% in 1Q22 versus 9.0% in 1Q21, with 2022 pricing expected to flatten further.
Property and casualty (P/C) insurer performance has proven resilient amid considerable challenges due to the pandemic. One unanticipated outcome is sharp improvement in commercial automobile insurance underwriting results. Commercial auto moved to a 99% 2021 statutory CR. Commercial auto insurance is the third largest U.S. commercial lines segment, following 65% net written premium growth in the last five years, but accounting for only 18% of the much larger U.S. personal auto segment.
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