We see a bifurcating trend in US P&C profitability in 2021, as commercial insurance benefits from stronger underwriting results but personal lines face claims headwinds. Higher natural catastrophe and pandemic-related losses should sustain the hard market in commercial insurance, but the current surge in home construction prices will likely increase severity of claims in property lines.
We forecast US P&C ROE to moderate to about 6% in 2021 from 6.8% last year.
The sector's profitability gap is estimated at 4% in 2020.
We raise our premium growth forecast for 2021 to 6.3%.
Surging home construction prices are raising claims severity in the short term.
Low investment yields will continue to curb future sector profitability.