US property and casualty (P&C) insurers are poised for improved returns this year as pandemic-related losses subside and many commercial segments are undergoing favourable pricing trends, Fitch says.

Near-term P&C results will be influenced by the pace at which auto claims frequency rises and whether claims severity persists in a number of liability segments, the agency says, noting severe US winter storms have generated potential record first-quarter catastrophe losses.

Fitch forecasts an improvement in the sector’s combined ratio to 97% this year, compared with 98.7% last year and 99% in 2019. Net written premium growth for the industry will likely remain under 3% in 2021 after growing 2.5% last year and 3.4% in 2019, it says.

The trends are supportive of individual insurer ratings, Fitch says, noting the sector maintained a modest underwriting profit last year despite the pandemic, an active hurricane season, wildfires and instances of civil unrest.

P&C insurance “remained a source of credit stability amid chaotic events in 2020”, Fitch says.

A sharp decline in claims frequency from lower rates of driving led to a reduction in the loss ratio for private passenger auto liability - the industry’s largest individual segment - by 9 points to below 70%. That was the lowest loss ratio in more than 30 years.

The 2020 combined ratio was boosted by 1.1 loss-ratio points of favourable calendar-year reserve development, mostly from workers’ compensation.

Property segments saw materially weaker results however, and workers’ compensation reported a 4-point loss ratio increase to around 75%, though it was buoyed by continued strong reserves.

“Reserve adequacy issues for the 2020 accident year will hinge on uncertainty of loss estimates for pandemic-related business interruption and longer duration liability claims, which are offset by significant potential benefits from underestimating losses from favourable frequency trends in multiple lines, including automobile and workers’ compensation,” Fitch says.