The total net underwriting loss for U.S. property & casualty after the first half of 2023 is $24.5 billion, just $2 billion short of the total recorded for all of last year, according to AM Best. 2022's first-half P&C underwriting loss was just $6.6 billion.

Rising loss costs, above-average catastrophe activity, and the struggling personal lines segment—especially homeowners insurance—were factors that AM Best listed as contributing to the losses. Global average estimated losses are now significantly higher than in years past after CAT losses in 2023 recently surpassed the total CAT losses in 2022.

CAT losses added 9.6 points to the industry combined ratio, which is estimated at 104.5 for 2023's first half, compared to 100.2 for the first half of 2022, when 5.6 points were attributed to CAT events. The first six months of 2023 did see 1.4 points in prior-year loss reserve development, compared to 1.8 points in 2022.

AM Best's estimates are similar to the Insurance Information Institute (Triple-I) and Milliman's recent projections, which said the P&C industry will not post a combined ratio of below 100 until 2025. 

During the first half of 2023, P&C net investment income declined 8%, according to AM Best's report, sinking pre-tax operating income to $9.4 billion, a drop of 69.5%. Additionally, a 40.7% drop in realized capital gains reduced net income down to $8.8 billion, or a decrease of 71.9%.

The P&C industry's surplus, which is defined as an insurer's total assets minus its liabilities, has increased 6.7% from the end of 2022, up to $1.05 trillion thanks to unrealized capital gains.

Losses driven by CAT events may now be the norm, according to models from Verisk. The insurance industry should expect loss totals of at least $100 billion every year, according to the data and analytics firm's projections.

The average annual losses over the past five years, 2018 to 2022, were $101 billion, significantly higher than the average of $70 billion from 2013 to 2017. However, the global modeled average annual loss is now $133 billion, an increase in the modeled average annual loss of $123 billion in 2022, a new high that is being driven by factors other than climate.

“The growth in exposure values, driven primarily by continued construction in high-hazard areas, and rising replacement costs—largely due to inflation—are the most significant factors responsible for increasing catastrophe losses," said Bill Churney, president of extreme event solutions at Verisk. “The other significant factor is the impact of climate change, which is often cited as the primary reason for the increase in losses. But, while this plays a role, year-over-year growth of exposure and rising replacement values have a far greater short-term impact."

2023 has already set the record for yearly billion-dollar weather disasters in the U.S. There have been 23 extreme weather events that cost at least $1 billion this year through August, according to the National Oceanic and Atmospheric Administration (NOAA).

In addition to Hurricane Idalia and Hawaii's firestorm, NOAA added an Aug. 11 Minnesota hailstorm, severe Northeast storms in early August, and other storm, hail and flooding activity across the U.S. to its list of billion-dollar storms.

AnneMarie McPherson Spears is IA news editor.