P&C Insurers: Strategic Planning Amid Financial Resurgence

Property and casualty (P&C) insurers made a strong return to profitability. Amid ongoing uncertainty, this may present a valuable opportunity to retroactively evaluate their enterprise risk management (ERM) frameworks.

P&C INSURERS STAGE REMARKABLE FINANCIAL TURNAROUND

Following a perfect storm of underwriting losses, inflation and rising weather -related insurance costs, the latest full-year financials show a strong profit recovery across the P&C sector.
 

Investment performance rebounds as markets recover

After a historic year in 2022 when both stocks and bonds posted negative returns, the S&P 500 Index delivered two consecutive years of total returns over 20% and bond markets stabilized as the Fed brought its hiking cycle to an end then started to ease rates (Figure 1, left). In 2024, P&C insurers’ investment income increased by 28%, and net realized capital gains surged by 57% (Figure 1, right).
 

Figure 1: Insurance companies have taken advantage of stronger financial markets¹

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Underwriting performance also rebounds strongly

For the first time since 2020, the P&C sector also posted a net underwriting gain, with $26.8bn in underwriting profit (Figure 2). This appeared to be driven by a focus on premium growth and disciplined underwriting, as the industry’s combined ratio improved to 96.6 from 101.6 in 2023². Net premiums written (across both personal and commercial lines) rose by 8.8% to $932.7bn, while net premiums earned increased by 9.9% to $902.5bn. Incurred losses increased a modest 2.1%.
 

Figure 2: P&C insurers net underwriting gains turn positive for the first time since 2021²

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This performance helped offset rising reinsurance costs

Reinsurance premium rates continued to rise. Weather-related catastrophes remained historically high (Figure 3) while elevated inflation helped push up economic replacement costs. Major catastrophe losses were over $100bn³.
 

Figure 3: P&C results were strong despite continued high weather-related costs⁴

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P&C insurers delivered record net income and surplus

The bottom line for the industry was aggregate net income a $171bn, which drove the policyholder surplus to a record $1.1trn – a 7% year-on-year increase. Insurers also distributed $87bn in dividends³.
 

Figure 4: The bottom line is highly encouraging for the P&C industry⁵

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ARE P&C INSURERS WELL-PLACED TO MAINTAIN THEIR FINANCIAL PERFORMANCE?

The last few years provide a full cycle of financial performance for P&C insurers. With financial market uncertainty and weather-related losses likely to remain, we believe now may be a good time to test the effectiveness of ERM programs and revisit all major risk tolerance limits.

As part of this, we believe working with investment managers to align underwriting pricing assumptions with capital market expectations can help establish robust strategic investment guidelines to control net income and statutory surplus volatility. We believe P&C industry ERM practices favor a holistic approach to managing both investment and underwriting volatility to manage their contribution to net income volatility.

Risks continue to evolve on both sides of insurers’ balance sheets. On the underwriting side, geopolitical uncertainties, such as tariffs, remain significant for inflation risks while on the investment side, valuation risks and increased allocations to private assets warrant ongoing vigilance in ERM practices.

We believe a robust ERM program can help equip insurers to navigate industry challenges and proactively prepare for future uncertainties. We advocate a holistic approach to modeling surplus risk, ensuring resilience across diverse market conditions.
 

1 Bloomberg (left chart indices: S&P 500, Bloomberg US Aggregate Bond index), S&P Global Market Intelligence, June 2025. Past performance is not indicative of future
results. Investment in any strategy involves a risk of loss which may partly be due to exchange rate fluctuations.
2 S&P Global Market Intelligence, June 2025
3 S&P Global Market Intelligence, June 2025
4 Noaa, Macrobond, June 2025
5 S&P Global Market Intelligence, June 2025

RISK DISCLOSURES

Past performance is not indicative of future results. Investment in any strategy involves a risk of loss which may partly be due to exchange rate fluctuations.

Past performance is not indicative of future results. Investment in any strategy involves a risk of loss which may partly be due to exchange rate fluctuations.

The performance results shown, whether net or gross of investment management fees, reflect the reinvestment of dividends and/or income and other earnings. Any gross of fees performance does not include fees, taxes and charges and these can have a material detrimental effect on the performance of an investment. Taxes and costs incurred when purchasing, holding, converting or selling any investment, will impact returns. Costs may increase or decrease as a result of certain currency conversions, such as currency hedging, investment exposure to international markets, and exchange rate fluctuations.

Any target performance aims are not a guarantee, may not be achieved and a capital loss may occur. The scenarios presented are an estimate of future performance based on evidence from the past on how the value of this investment varies over time, and/or prevailing market conditions and are not an exact indicator. They are speculative in nature and are only an estimate. What you will get will vary depending on how the market performs and how long you keep the investment/product. Strategies which have a higher performance aim generally take more risk to achieve this and so have a greater potential for the returns to be significantly different than expected.

Any projections or forecasts contained herein are based upon certain assumptions considered reasonable. Projections are speculative in nature and some or all of the assumptions underlying the projections may not materialise or vary significantly from the actual results. Accordingly, the projections are only an estimate.

Portfolio holdings are subject to change, for information only and are not investment recommendations.

ASSOCIATED INVESTMENT RISKS

Fixed income

Investments in bonds are affected by interest rates and inflation trends which may affect the value of the portfolio.

A credit default swap (CDS) provides a measure of protection against defaults of debt issuers but there is no assurance their use will be effective or will have the desired result.

The issuer of a debt security may not pay income or repay capital to the bondholder when due. The return risk to a portfolio is higher where a portfolio is highly concentrated in such an issuer.

Derivatives may be used to generate returns as well as to reduce costs and/or the overall risk of the portfolio. Using derivatives can involve a higher level of risk. A small movement in the price of an underlying investment may result in a disproportionately large movement in the price of the derivative investment.

Investments in emerging markets can be less liquid and riskier than more developed markets and difficulties in accounting, dealing, settlement and custody may arise.

Where high yield instruments are held, their low credit rating indicates a greater risk of default, which would affect the value of the portfolio.

The investment manager may invest in instruments which can be difficult to sell when markets are stressed.

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