Best’s Market Segment Report: Having Weathered 2020, Similar Challenges Persist for U.S. Property/Casualty Industry in 2021

Many factors that insurers encountered in 2020 likely will continue to impact the financial performance of the U.S. property/casualty (P/C) industry in 2021, with last year’s results reflecting a still-firm commercial lines pricing environment and higher-than-average catastrophe activity, according to AM Best’s annual Review & Preview market segment report.

The new Best’s Market Segment Report, titled, “P/C Industry Maintains Strong Capital in the Face of 2020 Challenges,” states that despite the high level of catastrophe losses in 2020, AM Best expects the P/C industry’s combined ratio to increase just slightly to 99.3 for the year, as reduced frequency in auto lines and improved pricing offset catastrophe experience. For most P/C lines of business, a rebound in auto accident frequency and severity is likely to lead to an expected combined ratio of 99.8 for 2021.

Many P/C insurers reacted to the COVID-19 pandemic with premium adjustments to cover the months during which the most severe restrictions were in place. Commercial lines premiums experienced offsetting impacts from higher rates, but lower payroll and sales. As a result, AM Best expects that net premiums written for the P/C industry will increase just 1.8% for 2020, the slowest growth in the past five years. However, with an increase in economic activity expected for 2021, a boost in industry net premiums written is likely.

Due to the deterioration in underwriting and investment performance in 2020, AM Best projects that pre- tax operating income for the year will drop by 15% to $51.1 billion, with net income falling by 21% to $48.8 billion. In 2021, a modest deterioration in underwriting results and a slight improvement in investment results are likely to generate marginally higher pre-tax operating income.

Litigation related to COVID-19-driven business interruption claims in the United States has generally favored insurers, but if recent cases in several states are broadly applied it could result in greater actual loss payments in 2021. AM Best’s forecast for 2021 does not presume any significant increase in business interruption payments related to the pandemic in the year, although loss adjustment expenses are expected to remain above historical levels as these cases proceed through the court system.

The market segment report also details AM Best’s expectations for the diverse lines of business that comprise the P/C industry, along with the rating agency’s market segment outlooks for these segments. Overall, AM Best believes that the trends that had been affecting the results of commercial lines insurers before the pandemic, including social inflation, rising reinsurance costs and secondary catastrophe events such as wildfires and convective storms, will remain in 2021. Proactive underwriting actions in the personal lines industry significantly diminished the adverse impact of catastrophe and COVID-19 losses in 2020, but ongoing economic pressures and the prevailing low interest rate environment will remain headwinds throughout 2021. Ultimately, the skills the P/C industry brought to bear in facing, and for the most part, meeting the challenges of 2020, will be needed again in 2021.

To access a copy of this market segment report, please visit

To view a video interview about this report with AM Best Directors Jennifer Marshall and Michelle Baurkot, please visit

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

Copyright © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.


Daniel Mangano
Senior Financial Analyst
+1 908 439 2200, ext. 5547

Data & News supplied by
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.