< PreviousCHAPTER 1: INDUSTRY OVERVIEW 8 Best’s Rankings $³FDSWLYH´RU³WLHG´DJHQWZRUNVSULPDULO\ZLWKDVLQJOHLQVXUHURUDJURXSRI insurers, and may receive business leads or some sort of special preference for having WKDWUHODWLRQVKLS7KHLQVXUHURIWHQR൵HUVEHQH¿WVVXFKDVKHDOWKFRYHUDJHPDUNHWLQJ support and training to the captive agent. Generally speaking, insurance companies with a captive agent force also may see better policyholder retention. For starters, independent agents are less likely to follow policyholders from one state to another when they move; many independent agents are not licensed in multiple states. Larger insurance organizations may have the resources to track and follow an insured, and they may alert a new agent in the area to where the policyholder has moved. In addition to agents, the following channels are used to get the business of insurance done: Brokers 7KHVHSURGXFHUVGRQRWQHFHVVDULO\ZRUNIRUDQLQVXUDQFHFRPSDQ\,QVWHDG WKHEURNHUZLOOSODFHSROLFLHVIRUFOLHQWVZLWKWKHFDUULHUR൵HULQJWKHPRVWDSSURSULDWH UDWHDQGFRYHUDJHWHUPV7KHEURNHULVUHZDUGHGE\WKHFDUULHURIWHQDWDUDWHWKDW GL൵HUVWKDQWKDWSDLGWRWKHFDUULHU¶VDJHQWV Managing General Agents 7KHVHLQGLYLGXDOVRURUJDQL]DWLRQVDUHJUDQWHGWKH authority by an insurer to perform a wide array of functions that can include placing business and issuing policies. Agents are paid commissions based on the value and type of products they sell. Some insurers pay brokers additional compensation based on how the business performs. Direct Sales: Direct selling of insurance to consumers through mail, internet or telephone solicitations has exploded in recent years. Insurance companies can bypass commissions by removing the agent from the transaction, although marketing and other DVVRFLDWHGFRVWVFDQR൵VHWWKH savings. Increasingly, online relationships are facilitated by WUD൶FDJJUHJDWRUV²EDVLFDOO\ Top 20 Global Brokers - 2021 Edition Ranked by 2020 Total Revenue 2020 Ranking 2019 Ranking Broker 2020 Total Revenue 11Marsh McLennan$17.20 billion 22Aon plc$11.07 billion 33Willis Towers Watson $9.35 billion 44Arthur J. Gallagher & Co. $6.00 billion 55Hub International $2.70 billion 66Brown & Brown Inc. $2.61 billion 77Truist Insurance Holdings Inc. $2.44 billion 88Lockton Inc. $2.10 billion 99Acrisure LLC$2.04 billion 1010USI Insurance Services LLC $1.98 billion 1111Alliant Insurance Services Inc. $1.80 billion 1213AssuredPartners Inc. $1.71 billion 1312NFP Corp. $1.60 billion 1414Amwins Group Inc. $1.50 billion 1516Howden Group Holdings*$991.0 million 1617The Ardonagh Group $973.4 million 1715CBIZ Inc. $963.9 million 1818EPIC Insurance Brokers & Consultants $725.5 million 19n/aConfie $507.3 million 2020Fanhua Inc. $500.9 million *Formerly Hyperion Insurance GroupCHAPTER 1: INDUSTRY OVERVIEW www.ambest.com9 DQDOWHUQDWLYHWHUPIRUSULFHFRPSDULVRQVLWHV7KHDJJUHJDWRUVHUYLFHOLQNVWKH consumer to the insurer. Aggregator companies receive a commission from product SURYLGHUVZKHQDSROLF\LVVROG7KH\DOVRPD\FKDUJHDIHHEDVHGRQDQ\FOLFN through to those providers. 7KHDJJUHJDWRUVHUYLFHFDQSUHVHQWFKDOOHQJHVRQWZRIURQWV7KHVLWHHQFRXUDJHV consumers to select insurance policies based almost exclusively on price, and direct sales are a threat to the independent agent. Important Functions of Insurance Organizations Investment: Insurers look to investment managers to make sure they have the funds available to pay claims in a timely manner, match expected losses with investments that mature or become available at appropriate times and help generate income that ZLOOFRQWULEXWHWRSUR¿WV,QYHVWPHQWSURIHVVLRQDOVKDQGOLQJLQVXUDQFHDVVHWVKDYHDQ additional complication: Insurers are prohibited by state regulators from investing too heavily in riskier, more volatile instruments. For that reason most insurers are heavily weighted in bonds and similar instruments, and less heavily invested in stocks. Actuarial: Insurance is based on probability and statistics. Actuaries are skilled in both areas and use their training to help insurers set rates, develop and price policies and coverage, determine reserves for anticipated claims and develop new products WKDWSURYLGHFRYHUDJHDWDSUR¿W$FWXDULHVPXVWSDVVH[WHQVLYHH[DPVWRHDUQWKHLU IRUPDOGHVLJQDWLRQV$FWXDULHVSOD\LQÀXHQWLDOUROHVLQDOOVHFWRUVRILQVXUDQFH LQFOXGLQJSURSHUW\FDVXDOW\OLIHKHDOWKDQGUHLQVXUDQFH7KHUROHRIDFWXDULHVJURZV as noninsurance industries—such as hedge funds, risk modelers and capital markets participants—become involved in developing risk products and programs. Underwriting: At the heart of insurance is the art and science of assuming risk. Underwriters use a combination of data gathering and analysis, interviewing and professional knowledge to evaluate whether a given risk meets the insurer’s standards IRUSUXGHQWHYDOXDWLRQ7KHLUMRELVWRHYDOXDWHZKHWKHUJLYHQULVNVFDQEHFRYHUHG and, if so, under what terms. Underwriting departments often have the authority to DFFHSWRUUHMHFWULVNV3HUKDSVWKHPRVWVLJQL¿FDQWUHVSRQVLELOLW\RIXQGHUZULWHUV is to determine premium that recognizes the likelihood of a claim and enables the LQVXUHUWRHDUQDSUR¿W6RPHRIWKHSURFHVVKDVEHHQDXWRPDWHGVXFKDVZKHQDXWR and homeowners insurers access information like driving and property records. Applicants for life insurance and some forms of health coverage may be asked to obtain medical evaluations. Claims: 6RPHWLPHVFDOOHGWKHDFWXDO³SURGXFW´WKDWLQVXUDQFHFRPSDQLHVGHOLYHU FODLPVGHSDUWPHQWVXVXDOO\RSHUDWHLQWZRDUHDVDWWKHR൶FHVRIWKHLQVXUHUDQGCHAPTER 1: INDUSTRY OVERVIEW 10 World’s Largest Insurance Companies – 2021 Edition Based on 2019 net non-banking assets. 2019 Asset Rank 2018 Asset RankAMB#Company NameCountry of Domicile 2019 Net Non-Banking Assets US$ (000)% Change* 12085014Allianz SE Germany1,096,870,88012.75 23058182Prudential Financial, Inc. United States896,552,00010.00 31085085AXA S.A. France843,323,040-14.78 45058334Berkshire Hathaway Inc. United States817,729,00015.53 54090826Nippon Life Insurance Company Japan742,784,8841.61 66058175MetLife, Inc. United States740,463,0007.70 79086120Legal & General Group Plc United Kingdom735,409,86913.82 810086446Ping An Ins (Group) Co of China Ltd China708,648,92416.08 97090527Japan Post Insurance Co., Ltd.Japan664,719,463-3.03 1012052446China Life Insurance (Group) Company China646,493,67113.36 1113066866Manulife Financial Corporation Canada619,267,6467.85 1214085909Aviva plc United Kingdom603,489,0087.11 1311085124Assicurazioni Generali S.p.A. Italy576,322,880-0.24 1416046417Dai-ichi Life Holdings, Inc. Japan556,635,2967.28 1515090906National Mut Ins Fed Agricultural Coop Japan535,522,083-1.60 1617058702American International Group, Inc. United States525,064,0006.72 1719085244Aegon N.V. Netherlands494,057,76012.24 1818086056CNP Assurances France493,210,2565.98 1921093310Credit Agricole AssurancesFrance476,487,20011.22 208085925Prudential plc United Kingdom454,214,000-29.88 2120085485Life Insurance Corporation of IndiaIndia426,706,2023.07 2222086976Zurich Insurance Group Ltd Switzerland404,688,0002.36 2323090828Meiji Yasuda Life Insurance Company Japan395,260,9311.17 2425061691New York Life Insurance Company United States371,648,0009.58 2524091242Sumitomo Life Insurance Company Japan358,420,4712.20 World’s Largest Insurance Companies – 2021 Edition Based on 2019 net premiums written. 2019 Premium Rank 2018 Premium RankAMB#Company NameCountry of Domicile 2019 Net Premiums Written US$ (000)% Change* 11058106UnitedHealth Group Incorporated 1 United States189,699,0006.52 23086446Ping An Ins (Group) Co of China Ltd China110,746,84510.51 32085085AXA S.A. France101,144,9600.34 44052446China Life Insurance (Group) Company China97,744,8677.52 55070936Kaiser Foundation Group of Health PlansUnited States97,247,3495.64 66058180Anthem, Inc. United States94,730,00011.38 77085014Allianz SE Germany86,656,6406.45 810085320People's Ins Co (Group) of China Ltd China74,419,77410.86 98085124Assicurazioni Generali S.p.A. Italy74,238,0804.49 1012051149Centene Corporation 1 United States71,714,00025.13 119020013State Farm Group 2 United States70,640,883-0.56 1213058052Humana Inc 1 United States62,948,00014.57 1311058334Berkshire Hathaway Inc. United States62,811,0006.07 1415086577Munich Reinsurance Company Germany54,663,8404.49 1514090826Nippon Life Insurance Company Japan52,112,815-6.75 1619070080CVS Health Corp Group 2 United States52,026,20713.57 1717085485Life Insurance Corporation of IndiaIndia50,491,13312.42 1821090598China Pacific Insurance (Group) Co Ltd China46,543,2596.84 1918046417Dai-ichi Life Holdings, Inc.Japan45,314,104-8.58 2020085925Prudential plc United Kingdom43,481,000-2.14 2116090906National Mut Ins Fed Agricultural Coop Japan42,580,588-17.62 2222058175MetLife, Inc. United States42,235,000-3.66 2323086976Zurich Insurance Group Ltd Switzerland41,251,0000.05 2426093310Credit Agricole AssurancesFrance40,580,96010.23 2525069154Health Care Service Corporation Group United States40,052,9915.27 * Percent change is based upon local currency. Source: * Percent change is based upon local currency. 1 Premiums shown are earned premiums. 2 AM Best consolidation; U.S. companies only. Source: Best’s Rankings Best’s RankingsCHAPTER 1: INDUSTRY OVERVIEW www.ambest.com11 LQWKH¿HOGWKURXJKFODLPVDGMXVWHUV&ODLPVDUHUHTXHVWVIRUSD\PHQWEDVHGRQ losses believed by the policyholder to be covered under an insurance policy. Claims personnel evaluate the request and determine the amount of loss the insurer should pay. Requests for claims payment can come directly to insurers or be handled by agents and brokers working directly with the insured. Claims adjusters can work directly for an insurer or operate as independent businesses that can work for multiple insurers. Claims adjusters often have designated levels of authority to settle claims. Adjusters serve as claims investigators and sometimes conduct elaborate investigations in the event of suspected fraudulent claims. Insurance Entities Ownership of traditional insurance companies generally comes in two structures, mutual and stock, although insuring entities may take a number of other forms, including reciprocal exchanges and risk retention groups. Mutual insurers are owned E\DQGUXQIRUWKHEHQH¿WRIWKHLUSROLF\KROGHUV5HODWLYHWRLQVXUDQFHFRPSDQLHV with shareholder ownership, mutual insurers have less access to the capital markets to raise money. Many mutual insurance companies have been formed by people or businesses with a common need, such as farmers. Mutuals pay a return of premium or ³SROLF\KROGHUGLYLGHQG´EDFNWRWKHSROLF\KROGHULIWKHFRPSDQ\KDVVWURQJ¿QDQFLDO results and a lower-than-expected level of claims. Policyholders also have the ability to vote on company leadership and have a say in certain corporate governance issues. Top 10 U.S. Holding Companies - 2021 Edition Ranked by Assets RankCompany NameAMB#2020 Total Assets ($000)2019 Total Assets ($000)% Change 1Prudential Financial, Inc.058182940,722,000896,552,0004.90% 2Berkshire Hathaway Inc. 058334873,729,000817,729,0006.80% 3MetLife, Inc. 058175795,146,000740,463,0007.40% 4American International Group, Inc. 058702586,481,000525,064,00011.70% 5Lincoln National Corporation 058709365,948,000334,761,0009.30% 6Principal Financial Group, Inc. 058179296,627,700276,087,8007.40% 7Equitable Holdings, Inc. 051409275,397,000249,818,00010.20% 8Brighthouse Financial, Inc.046498247,869,000227,259,0009.10% 9UnitedHealth Group Incorporated058106197,289,000173,889,00013.50% 10Pacific Mutual Holding Company 050799190,672,000171,473,00011.20% Ranked by Revenue RankCompany NameAMB#2020 Total Revenue ($000)2019 Total Revenue ($000)% Change 1Berkshire Hathaway Inc. 058334286,415,000327,223,000-12.50% 2UnitedHealth Group Incorporated058106257,141,000242,155,0006.20% 3Anthem, Inc. 058180121,867,000104,213,00016.90% 4Centene Corporation 051149111,595,00075,082,00048.60% 5Humana Inc. 05805277,155,00065,394,00018.00% 6MetLife, Inc. 05817567,842,00069,620,000-2.60% 7Prudential Financial, Inc.05818257,116,00065,393,000-12.70% 8The Allstate Corporation 05831244,795,00044,681,0000.30% 9Liberty Mutual Holding Company Inc. 05111443,796,00043,228,0001.30% 10American International Group, Inc. 05870243,736,00049,746,000-12.10% Source: Holding Companies database Best’s Rankings12 CHAPTER 1: INDUSTRY OVERVIEW 12 Reciprocal insurance companies resemble mutual companies. Whereas a mutual insurance company is incorporated, the reciprocal company is run by a management company, referred to as an attorney-in-fact. 0DQ\PXWXDOVZHUHDEOHWRJURZGXULQJWKHFUHGLWFUXQFKRIWKHODWHV7KHLU growth is limited, however, because capital has to be generated internally, as there are no shares to sell. Some top former mutual insurance companies, including Metropolitan Life and Prudential, have demutualized to become shareholder-owned SXEOLFFRPSDQLHV7\SLFDOO\GHPXWXDOL]DWLRQLVGRQHWRUDLVHFDSLWDORUH[SDQG RSHUDWLRQV2WKHUFRPSDQLHVLQFOXGLQJ3DFL¿F/LIHDQG/LEHUW\0XWXDOWRRNDQ intermediate step and became part of a mutual holding company structure. A holding company structure, employed primarily in the United States, provides easier access to the capital markets, whereby shares can be sold to help raise capital. 7KHKROGLQJFRPSDQ\RZQVDVLJQL¿FDQWDPRXQWLIQRWDOORIDQRWKHUFRPSDQ\¶VRU other companies’ common stock. Many insurance companies are part of a holding company structure, with the publicly traded parent company owning stock of the subsidiary or the controlled insurance company or companies. Captive insurance companies are formed to insure the risks of their parent group or groups, and sometimes will insure risks of the group’s customers. Captive insurers KDYHEHFRPHPRUHKLJKSUR¿OHLQUHFHQW\HDUVDIWHUPDQ\86VWDWHVDQGVRPH international jurisdictions adopted legislation and rules encouraging captives to locate in their domiciles. A risk retention group is a liability insurance company owned by its policyholders. Membership is limited to people in the same business or activity, which exposes them WRVLPLODUOLDELOLW\ULVNV7KHSXUSRVHLVWRDVVXPHDQGVSUHDGOLDELOLW\H[SRVXUHWR JURXSPHPEHUVDQGWRSURYLGHDQDOWHUQDWLYHULVN¿QDQFLQJPHFKDQLVPIRUOLDELOLW\ 7KHVHHQWLWLHVDUHIRUPHGXQGHUWKH/LDELOLW\5LVN5HWHQWLRQ$FWRI 6WUXFWXUDOGL൵HUHQFHVEHWZHHQVWRFNDQGPXWXDOLQVXUDQFHFRPSDQLHVD൵HFWEXVLQHVV decisions. Stock companies have to answer to owners and policyholders, so if management’s investment strategies are carried out with shareholder expectations LQPLQG²VHL]LQJRSSRUWXQLWLHVIRUJURZWKDQGSUR¿W²WKH\PD\EHDFWLQJDWWKH expense of policyholders. Mutuals, on the other hand, are owned by the policyholders, VRWKHIRFXVOLNHO\ZLOOEHRQD൵RUGDELOLW\DQGGLYLGHQGV 2EVHUYHUVKDYHVWUXJJOHGWRPDNHPHDQLQJIXOFRPSDULVRQVRISUR¿WDELOLW\JHQHUDWHG by public and mutual companies. One thing is certain, however: No particular organizational structure is a cure-all for poorly conceived or executed strategies.SPOTLIGHT www.ambest.com13www.ambest.com13 On High Alert: Rising Risks of PFAS Claims and Litigation Capture New Attention Some industry experts are seeing parallels between PFAS risk and asbestos litigation that for years hit insurers hard. Insurers are now reacting by creating stand- alone products and adding PFAS-related policy exclusions for losses stemming from drinking water contamination, environmental remediation, and products liability and bodily injury claims related to WKH³IRUHYHUFKHPLFDOV´ In December 2020, 11 local water districts LQ&DOLIRUQLD¿OHGDODZVXLWLQ2UDQJH County Court alleging that four PFAS PDQXIDFWXUHUV²'X3RQWGH1HPRXUV7KH Chemours Company, 3M and Corteva, DORQJZLWKURR¿QJSURGXFWVPDQXIDFWXUHU 'HFUD5RR¿QJ6\VWHPV²ZHUHUHVSRQVLEOH for potentially more than $1 billion in cleanup and decontamination costs related to PFAS chemicals leaching into the districts’ groundwater and water systems. ,WZDVQ¶WWKH¿UVWWLPHWKHFRPSDQLHV have been brought into litigation over the use of the synthetic chemicals. In 'X3RQWDQGLWVVSLQR൵&KHPRXUV reached a $671 million settlement in roughly 3,550 personal injury lawsuits EURXJKWE\FLWL]HQVDOOHJLQJWKH\VX൵HUHG health consequences from drinking water contaminated by chemical releases from D3DUNHUVEXUJ:HVW9LUJLQLDSODQW7KH following year, 3M settled with Minnesota for $850 million for contaminating groundwater with chemicals used in its Scotchgard products. 3)$6GXEEHG³IRUHYHUFKHPLFDOV´ because of their pervasiveness and inability to break down in the environment for decades or even centuries, have long been used in many personal, household and commercial products. Along with environmental concerns, the man-made chemicals—of which there are more than 7,000 compounds—pose a potential threat to humans and have been linked to health risks such as reproductive and endocrine development disorders, certain types of cancer, and liver and immunological issues. Much like in the early days of lawsuits targeting companies manufacturing RUELQGLQJDVEHVWRV¿EHUVDQGRWKHU products containing large quantities of WKHFDUFLQRJHQLF¿EURXVVLOLFDWHPLQHUDO and the staggering impact those claims had on liability insurance—a legacy WKDWVWLOOKDXQWVLQVXUHUVWRGD\³ZH¶UH now seeing that once again with PFAS PDQXIDFWXUHUV´VDLGDWWRUQH\DQG VKDUHKROGHU-RKQ*DUGHOODRIWKHODZ¿UP CMBG3 Law LLC. John GardellaSPOTLIGHT 14 U.S. property/casualty insurers have been hard hit by asbestos and environmental ORVVHVRYHUWKH\HDUVDQGLQWKHSDVW¿YH years alone paid out $16.1 billion for claims while incurring $11.3 billion in losses, according to a 2020 Best’s Market Segment Report, AM Best’s A&E Loss Estimates Remain Unchanged. So far, the wave of PFAS lawsuits—many of which have also resulted in costly losses and settlements—has largely centered on environmental cleanup and remediation. But Gardella said lurking on the not-so-distant horizon is the growing threat of PFAS- related products liability and personal injury FDVHVWKDWFRXOGDOVRVLJQL¿FDQWO\LPSDFW insurers and their bottom lines. PFAS were accidentally developed by FKHPLVWVLQWKHODWHVDQGRYHUWKH years the oil- and moisture-resistant chemicals were widely used in the production of everyday products such as nonstick cookware, water-repellent clothing, cosmetics, stain-resistant fabrics DQGFDUSHWVDTXHRXV¿UH¿JKWLQJIRDPDQG food packaging. While the manufacturing and use RIWZRVSHFL¿F3)$6FRPSRXQGV² SHUÀXRURRFWDQHVXOIRQLFDFLG3)26DQG SHUÀXRURRFWDQRLFDFLG3)2$²ZHUH phased out of the U.S. nearly 20 years DJR3)$6VWLOOSRVHDVLJQL¿FDQWWKUHDW in the nation due to their environmental persistence and continued use or import in many consumer-based products such as food wrappers and furniture protectants, said Jamie Langes, assistant vice president of Philadelphia Insurance Companies’ Midwest territory environmental division. — Lori Chordas Insurers Turn to Apprenticeships Al Crook, head of HR business partners and apprenticeship at Zurich North America, years ago came across a troubling factoid: Some roles within the insurance industry ranked just behind those in real estate and the clergy in terms of age of employees. He’s quick to concede the apprenticeship SURJUDPKHKHOSHGIRXQG¿YH\HDUVDJRDW Zurich isn’t a panacea, but it was a good start that quickly grew into the multi- employer Chicago Apprentice Network. 7KHHQWLFHPHQWVRI=XULFK¶VWZR\HDU program? Free education, a guaranteed job and a promotion following completion. 7KHJRDOLVWRORRNEH\RQGFROOHJH graduates, particularly those with insurance-related degrees, as the sole group of prospective employees. ³:HNQHZWKDWWKHUHZDVDPRGHOWKDW worked in our European counterparts, and in other parts of the world apprenticeships DUHYHU\SRSXODU´&URRNVDLG³:LWKWKH need to always have more talent and access to more talent, apprenticeships were an untapped and undeveloped source for that talent. We knew that we could build it so that it could be more popular both in the industry and across the region in which we ZRUN´ 7KHIHGHUDO/DERU'HSDUWPHQWKDV made growing and expanding SPOTLIGHT www.ambest.com15 apprenticeship a priority, launching ³'LVFRYHU$SSUHQWLFHVKLS´¿YH\HDUVDJR DVSDUWRIDODUJHUH൵RUWWRLQFUHDVHMRE training and add 1 million new apprentices by Sept. 30, 2021. Since Jan. 1, 2017, more than 800,000 people in the U.S. have found employment through apprenticeships, DFFRUGLQJWRGHSDUWPHQW¿JXUHV0RUH WKDQLQZRUNHUVZKRFRPSOHWHDQ apprenticeship earn an average of $70,000 D\HDUDQGDUHVWLOOHPSOR\HGVL[ months after program completion. 7KH&KLFDJR$SSUHQWLFH1HWZRUNZDV launched in collaboration with Aon and Accenture and has grown from an LQDXJXUDOFODVVRIDSSUHQWLFHVWR DSSUHQWLFHVZRUNLQJZLWKPRUHWKDQ employers across industries, according to Aon and the Chicago Apprentice Network. Crook said 116 people have been hired at Zurich through the program. Zurich North America is part of Zurich Insurance Group, a multiline insurer IRXQGHGLQZLWKDERXW HPSOR\HHVWRGD\7KHFRPSDQ\SURYLGHV a range of property/casualty and life insurance products and operates in more than 210 countries and territories. Wider Net Zurich North America’s apprenticeship program is designed to broaden the company’s employee base, but there are some hurdles to overcome. ³2YHUWLPHZHIDOOLQORYHZLWKFHUWDLQ things. We’ve fallen in love with owning a car. We’ve fallen in love with owning a home. I believe as a country we also fell LQORYHZLWKWKHIRXU\HDUGHJUHH´&URRN VDLG³,WKLQNWKDW¶VZK\RWKHURSWLRQV OLNHDSSUHQWLFHVKLSVIHOORXWRIIDYRU´ Zurich’s earn-while-you-learn program— launched at its Schaumburg, Illinois, headquarters in 2016—provides a debt-free path to a professional career. Apprentices include high school graduates, veterans, those reentering the workforce after a hiatus, people wanting to move from a job to a career, and others attracted by the prospect of a guaranteed job and promotion. As a rule, apprentices spend part of the ZHHNDWZRUNDQGWKHUHVWDWVFKRRO7KH\ receive pay, commensurate with an entry- level job, from sponsoring companies. As Bridget Gainer, Aon’s chief commercial R൶FHUWHOOVLWLW¶VDOODERXWFUHDWLQJ networks. Once a quarter, the Chicago Apprentice Network holds meetings— which she likens to speed dating—for apprentices, interns and prospective HPSOR\HUVWRFRQQHFW7KHHYHQWVXVXDOO\ DWWUDFWDERXWSHRSOHDQGDOORZERWK newcomers and seasoned professionals to establish a base of mutual support, she said. ²7HUUHQFH'RSS Al CrookCHAPTER 2: PROPERTY/CASUALTY 16 Property/Casualty Market at a Glance 3URSHUW\FDVXDOW\LVNQRZQDV³QRQOLIH´ LQVXUDQFHLQPDQ\SDUWVRIWKHZRUOG7KH ZRUG³SURSHUW\´XVXDOO\UHIHUVWRSK\VLFDO things, including autos, buildings, ships and other concrete items that can be lost, GDPDJHGRURWKHUZLVHEHFRPHD¿QDQFLDO ORVVWRWKHLQVXUHG7KHZRUG³FDVXDOW\´ usually refers to the concept of liability, and is often associated with coverage of negligent acts or omissions. Casualty areas are some of the largest, including auto liability, professional liability, workers’ compensation DQGJHQHUDOOLDELOLW\7KHUHODWLYHVL]HRI property/casualty insurers is often gauged by premiums collected. In the United States, property/casualty LQVXUHUV¿OHDVSHFLDOVWDWHPHQWZLWK the National Association of Insurance &RPPLVVLRQHUV7KH¿OLQJLVGHVLJQHGWR determine premiums and losses by lines of business and to give an accurate view of the insurer’s reserving for loss. As of this publication, AM Best’s database FRQWDLQHG¿OLQJVWDWHPHQWVIRUWRWDO single companies operating in the U.S. property/casualty market. According to the 86'HSDUWPHQWRI/DERUSHRSOH work in the property/casualty industry. According to AM Best’s 2020 Review & Preview report, the property/casualty industry faces a range of issues. $0%HVWEHOLHYHVWKDWWKHWUHQGVD൵HFWLQJWKHUHVXOWVRIWKHFRPPHUFLDOOLQHVEHIRUHWKH pandemic are likely to remain headwinds in 2021. Among the issues the industry faces is WKHRQJRLQJJURZWKLQVRFLDOLQÀDWLRQGULYHQE\HPHUJLQJVRFLDOWUHQGVDQGDQLQFUHDVH LQWKLUGSDUW\OLWLJDWLRQ¿QDQFLQJULVLQJUHLQVXUDQFHFRVWVDQGFKDOOHQJHVDVVRFLDWHGZLWK VHFRQGDU\FDWDVWURSKHHYHQWVVXFKDVZLOG¿UHVDQGFRQYHFWLYHVWRUPV$GGLWLRQDOO\ZLWK favorable pricing conditions expected to continue, companies without legacy concerns may have an opportunity to take advantage of those positive trends, increasing competition, and SRWHQWLDOO\VKRUWFLUFXLWLQJSULFHUHFRYHU\7KHFXUUHQWLQYHVWPHQWPDUNHWLVDOVRDSRWHQWLDO US Property Casualty - Top Insurers by Net Premiums Written (2020) (US$ Billions) Source: – Aggregates & Averages Property/Casualty United States & Canada, 2021 Edition 01020304050607080 Farmers Ins Group (000032) Nationwide Group (005987) Chubb INA Group (018498) USAA Group (004080) Travelers Group (018674) Liberty Mutual Ins Cos (000060) Allstate Ins Group(000008) Progressive Ins Group(000780) Berkshire Hathaway Ins(000811) State Farm Group (000088) US Property Casualty - Top Insurers by Gross Premiums Written (2020) (US$ Billions) 01020304050607080 Nationwide Group (005987) Farmers Ins Group (000032) USAA Group (004080) Chubb INA Group (018498) Travelers Group (018674) Allstate Ins Group (000008) Liberty Mutual Ins Cos (000060) Progressive Ins Group (000780) Berkshire Hathaway Ins (000811) State Farm Group (000088) Source: – Aggregates & Averages Property/Casualty United States & Canada, 2021 EditionCHAPTER 2: PROPERTY/CASUALTY www.ambest.com17 drag on operating performance, but it does drive a greater commitment to maintaining underwriting and pricing discipline to achieve desired total returns. Surplus levels continue to support the underlying risks for most U.S. homeowners’ FDUULHUVGHVSLWHWKHDGYHUVHH൵HFWVRI more frequent catastrophes, the COVID- SDQGHPLFDQGRQJRLQJYRODWLOLW\LQ investments. Owing to the rebound in the equity markets throughout 2020, a vast majority of homeowners carriers were able to absorb the downturn with favorable risk-adjusted capitalization maintained. $GGLWLRQDOO\FRUHUHVXOWVUHPDLQSUR¿WDEOH GHVSLWHLQFUHDVHGQRQ&$7ZHDWKHUORVVHV DQGKLJKHUIUHTXHQF\RI¿UHDQGZDWHUORVVHV owing to proactive underwriting actions, including improved pricing sophistication, ongoing exposure management, and GLYHUVL¿HGUHLQVXUDQFHSURJUDPV$GYDQFHV in predictive modeling and pricing analytics, as well as third-party data, have provided opportunities for homeowners carriers to SXUVXHSUR¿WDEOHJURZWK Key countervailing factors include elevated catastrophe activity, the rise in reinsurance pricing, and the ongoing economic impact of &29,'86FDWDVWURSKHORVVHVWUHQGHG well above normal levels in 2020, and are likely to remain moderately elevated, which will further fuel the rise in reinsurance pricing expected for 2021. Although the pandemic is not H[SHFWHGWRPDWHULDOO\D൵HFWWKH86KRPHRZQHUVVHJPHQWRQJRLQJGHSUHVVHGHFRQRPLF FRQGLWLRQVDQGWKHLQKHUHQWULVNRISULFHLQÀDWLRQIRUFRQVWUXFWLRQVXSSOLHVDQGFRQWUDFWRUV may further increase the cost of adjusting claims, transporting goods, and labor. Most personal auto writers maintain a consistently favorable capital position built upon ongoing use of newer technology and data analytics to supplement underwriting, claims handling and ratemaking. AM Best believes that the private passenger auto industry’s favorable overall operating performance in recent years will continue throughout the remainder of 2021, owing to the improvement in auto claims frequency that has somewhat QHJDWHGRQJRLQJVHYHULW\SUHVVXUHV)UHTXHQF\ZLOOFRQWLQXHWREHQH¿WIURPIHZHUGULYHUV on the road for the foreseeable future, as the pandemic persists and employers extend US Property Casualty - Top Insurers by Total Admitted Assets (2020) (US$ Billions) 01020304050 Progressive Ins Group (000780) Nationwide Group (005987) Allstate Ins Group (000008) USAA Group (004080) Amer Intl Group (018540) Chubb INA Group (018498) Travelers Group (018674) Liberty Mutual Ins Cos (000060) State Farm Group (000088) Berkshire Hathaway Ins (000811) Source: – Aggregates & Averages Property/Casualty United States & Canada, 2021 Edition U.S. Property/Casualty – Policyholders’ Surplus (2020) (US$ Billions) Source: – Aggregates & Averages Property/Casualty United States & Canada, 2021 Edition 050100150200250 FM Global Group (018502) Nationwide Group (005987) Chubb INA Group (018498) Amer Intl Group (018540) Allstate Ins Group (000008) Travelers Group (018674) Liberty Mutual Ins Cos (000060) USAA Group (004080) State Farm Group (000088) Berkshire Hathaway Ins (000811)Next >