Property & casualty industry aggregate. Property & casualty industry aggregate. (Source: Fitch Ratings/SNL Financial)

Underwriting losses in the U.S. P&C personal lines segment moved higher for the fourth straight year in 2017, though this time another segment drove the increase, according to Fitch Ratings in a new report.

Personal lines are the largest major segment in the P&C industry representing 55% of industry net written premiums. The industry statutory personal lines combined ratio rose to 103.8% in 2017 despite moderate improvement in the personal auto segment.

Homeowners’ insurance turned sharply unfavorable

Following four consecutive years of strong underwriting gains in the homeowners’ segment, industry underwriting results in homeowners insurance turned sharply unfavorable last year with the combined ratio rising to 107% due to higher catastrophe-related losses.

Related: Catastrophe losses triple for P&C insurers in 2017, Fitch Ratings reports

“The homeowners’ line is traditionally a more volatile product segment, which experienced a higher combined ratio than personal auto for the first time since 2012,” said James Auden, managing director at Fitch Ratings.

Private auto improved

By contrast, personal automobile insurance, responsible for much of the underwriting losses in each of the three years prior due to inadequate pricing and adverse claims trends, is showing some improvement. Though underwriting losses were sizeable again in 2017, the combined ratio fell by nearly four points to 102.6% for the year.

Personal auto has been the fastest growing major industry segment over the last two years with over 7% net written premium growth. “Growth for auto insurance premiums is likely to continue in 2018 due to favorable price movements,” said Auden. This could help to shift fortunes for a market segment that has not earned an underwriting profit in over a decade.

Encouraging outlook

Going forward, the outlook is more encouraging for both personal auto and homeowners insurance. Auto insurance is positioned to move closer to a 100% combined ratio in 2018 while the homeowners line will likely return to a solid underwriting gain this year, barring unusually large catastrophe loss experience.

Fitch’s sector outlook remains negative on the U.S. personal lines insurance sector, though the rating outlook for nearly all personal lines writers is stable.


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