The American Property Casualty Insurance Association (APCIA) maintains property and casualty insurers are combating inflation, escalating claims, and record natural disaster losses amid rising capital costs.
APCIA officials recently detailed its white paper with University of South Carolina Associate Professor Robert Hartwig examining the circumstances, which have resulted in significant pressure for property insurers, reinsurers, and consumers.
“The U.S. property casualty insurance industry is facing significant pressure from rising economic inflation, legal system abuse, supply chain constraints, increasing catastrophic weather driving up losses, and historic cost increases for reinsurance and other forms of capital,” APCIA Property and Environmental Vice President Karen Collins said. “The combined effects are resulting in the hardest market cycle in a generation. Commercial and personal property lines customers, particularly those in high-risk regions, may feel the effects of recent, elevated cost trends.”
The white paper determined the price of single-family residential home construction materials has climbed 33.9 percent since the start of the pandemic, while trade services are up 27 percent. According to A.M. Best, the U.S. property casualty insurance industry’s policyholder surplus fell 9.4 percent in 2022 and is likely to be the largest drop since early 2009, according to Standard & Poor. Additionally, reinsurance broker Guy Carpenter estimates property-catastrophe reinsurance prices rose 30.1 percent in 2023 in the wake of a 14.8 percent rise in 2022.
“This unusual combination of challenges has created a perfect storm resulting in a significant deterioration in personal lines loss results in 2022, according to Fitch and S&P Global Market Intelligence,” Collins said. “The growth of population, housing, and businesses in hazard-prone areas are exacerbating the effects of climate change, leading to more frequent and severe catastrophe losses.”