The Changing Landscape of Specialty Commercial Carriers: What 2024 Might Hold for the U.S. P/C Insurance Performance Rankings

In recent years, specialty commercial carriers have consistently outperformed in the U.S. Property & Casualty (P/C) insurance market, thanks to a strong macroeconomic environment and resilient underwriting practices. S&P Global Market Intelligence’s annual U.S. P/C Insurance Performance Rankings has crowned specialty carriers like Kinsale Capital Group Inc. as the top performers for the past two years. However, while 2023 saw many of these players benefit from robust growth and underwriting profitability, emerging factors in 2024 could present new challenges and reshape future rankings.

At DOXA, we’ve always been attuned to the shifts in the insurance landscape, and we believe it’s crucial to examine these trends closely as they unfold. By doing so, we can better support our partners in navigating these evolving conditions and seizing opportunities within the market. Let’s dive deeper into what has driven recent performance and explore how the tides may be shifting as we look ahead to 2024.

Kinsale and Arch: Leading the Pack in Specialty Lines

For the second consecutive year, Kinsale Capital Group Inc., a pure-play U.S. excess and surplus lines carrier, claimed the top spot in S&P Global’s rankings. Their dominance was driven by strong growth in premiums, assets, and policyholders’ surplus. Kinsale’s focus on niche, often high-risk markets allowed them to maintain a growth trajectory that outpaced many competitors.

Arch Capital Group Inc.’s U.S. P/C operations, another top performer, ranked second. Arch’s strength in returns on both assets and average capital and surplus bolstered its performance. Notably, Arch posted an impressive 38.4% return on average surplus, securing its place as one of the leaders in the P/C insurance space.

FM Global, known for its long-standing history dating back to 1835, rounded out the top three. The company reported one of its most successful years, with a combined ratio of 69, a testament to its underwriting discipline.

Underlying Trends Supporting Strong Performance

Many commercial lines writers benefitted from favorable business trends that emerged post-COVID-19, with cyclical pricing trends helping to bolster premium growth. Specialty insurers, particularly those with a focus on excess and surplus lines, were able to capitalize on these conditions. Specialty carriers are often better positioned to absorb market volatility due to their diversified risk portfolios and tailored underwriting practices.

However, the sustainability of these trends is uncertain. For example, the impact of social inflation—a phenomenon where litigation trends increase claim costs—has been a growing concern. This inflationary pressure, particularly in casualty lines, could affect reserve development for prior accident years and weigh on underwriting results in 2024.

At DOXA, we recognize that these cyclical trends play a pivotal role in shaping carrier performance. But as we look ahead, we are increasingly focused on the emerging risks and how they might influence future rankings.

Personal Lines Insurers Poised for a Comeback?

While specialty commercial carriers have enjoyed the spotlight, personal lines insurers may be poised for a resurgence in 2024. The private passenger auto sector, in particular, demonstrated rapid premium growth at the beginning of 2024—the fastest in over two decades. At the same time, loss-cost inflation, which had previously been a significant headwind, began to slow from its recent peak.

Personal lines-focused entities were notably underrepresented among the top 50 P/C insurers in 2023, with only Progressive Corp. and Berkshire Hathaway Inc. (parent of GEICO) making the cut. However, the return to underwriting profitability in the private auto business suggests that personal lines carriers could rise in future rankings.

Additionally, while the homeowners insurance sector faced a challenging year in 2023—with the combined ratio spiking to 110.9, the highest in 12 years—a slight improvement is projected for 2024. The frequency and severity of claims, particularly related to catastrophic events like hurricanes, will be key determinants of performance in the homeowners market.

The resurgence of personal lines insurers would represent a shift toward a more balanced performance ranking. As personal lines recover, we expect to see a more diverse mix of top-performing carriers, much like we did in 2019, when personal lines-focused entities comprised a significant portion of the top 50.

Challenges Looming on the Horizon for Commercial Lines

Despite the success of many commercial lines writers in recent years, headwinds are emerging. Loss reserves for accident years 2015-2019, particularly in certain casualty lines, have been a source of concern. Several carriers reported unfavorable reserve development in late 2023, attributing these losses to the effects of social inflation and claims severity.

Additionally, while commercial lines premium growth remained strong in 2023, it has been retreating from its 2021 peak. As the U.S. economy faces potential challenges, the resilience of commercial lines may be tested. This could introduce volatility in the underwriting profitability that has propelled many commercial lines carriers to the top of the rankings.

At DOXA, we understand that these shifts represent both challenges and opportunities. As the economic and social landscape evolves, insurers will need to adapt quickly. Carriers that can stay agile—leveraging data-driven insights and innovative underwriting practices—will be better positioned to weather these challenges and maintain their performance.

The Importance of Metrics in Ranking Performance

S&P Global Market Intelligence’s rankings are determined using 13 financial metrics grouped into six categories, with a heavy emphasis on returns and underwriting profitability. These metrics, drawn from statutory filings, provide an in-depth view of carrier performance and help paint a clear picture of who’s excelling and why.

The emphasis on returns on assets and capital and surplus—weighted at 35%—underscores the importance of not only growing premiums but also generating strong returns on invested capital. Underwriting profitability, which accounts for 30% of the overall score, reflects how well carriers manage their loss ratios and overall operational efficiency.

As the rankings evolve, these metrics will continue to be critical in understanding the competitive landscape. For carriers, including those we partner with at DOXA, maintaining a strong focus on financial health and underwriting discipline will be essential for staying competitive.

What to Watch for in 2024

Looking ahead to the 2024 rankings, we anticipate a more balanced mix of top-performing carriers. While specialty commercial lines carriers have dominated in recent years, personal lines insurers may see a resurgence as their markets stabilize. Simultaneously, challenges in commercial lines, particularly in casualty reserves and premium growth, could weigh on future performance.

At DOXA, we’re committed to helping our partners stay ahead of the curve. As market conditions shift, it’s more important than ever to stay agile, data-driven, and proactive in identifying both risks and opportunities. If you’re looking to navigate the evolving landscape of P/C insurance, we’re here to help. Let’s connect and explore how we can drive your success in 2024 and beyond.

Connect with us today at DOXA to discuss how we can help you thrive in a rapidly changing insurance market.