Record investment income for US P&C insurers in 2023: AM Best  June 5th 2024

Record investment income for US P&C insurers in 2023: AM Best

In 2023, net investment income for the US property/casualty insurance sector reached a record $73.9 billion, boosted by higher interest rates, according to a new report by AM Best, a credit rating agency for the insurance industry.

The Best’s Special Report, “US P/C Insurers Achieve Record Investment Income in 2023,” reveals that net investment income rose by 1.4 percent over the previous year, reaching $73.9 billion. However, 2022’s figures were skewed by a $10.8 billion intercompany distribution from a large reinsurer.

Without this one-time event, net investment income growth in 2023 would have been nearly 20 percent. This increased investment income helped offset poor performance in sectors like auto insurance.

With rising weather and catastrophe-related losses, investment income is becoming crucial to counteract poor underwriting results.

“Aggregate net underwriting income has been volatile in the last 10 years—and often negative across the industry—and so investment income remains vital to earnings,” commented Helen Andersen, Industry Analyst, AM Best.

$168bn in fees & commissions earned from insurance broking activity in 2023

The value of the worldwide market for insurance broking in terms of fees and commissions earned was around $168 billion in 2023, considerably up from around $151 billion in 2022, according to Insuramore a provider of marketing services focusing on the insurance sector.

This increase is equivalent to a growth rate of around 11.3% without adjusting for inflation, but closer to 4.4% as an inflation-adjusted measure.

According to Insuramore, in 2023, this market is estimated to have broken down between around $76.6 billion due to commercial property & casualty (P&C) (non-life) retail broking, $16.5 billion to private P&C (non-life) retail broking, $54.5 billion to employee benefits plus life and health insurance retail broking, $7.4 billion to reinsurance broking, and $13 billion to wholesale broking.

Each of the segments registered a double-digit growth rate during the year apart from employee benefits plus life and health insurance retail broking, analysts noted.

Insuramore also added, without adjusting for inflation, the top 15 broking groups together achieved an even higher aggregate growth rate of 12.3% albeit this was driven in part by M&A activity.

Top cybersecurity concerns for insurers in 2024

Insurance carriers are battling old cyber threats at the same time that 'adversarial AI' deepens the risk, Datos Insights reports.

A persistent cybersecurity challenge for insurance companies is structural: Executives often lack clarity around who owns the cybersecurity function, according to Datos Insights.

A persistent cybersecurity challenge for insurance companies is structural: Executives often lack clarity around who owns the cybersecurity function, according to Datos Insights.

Many of today's insurance carriers are rushing headfirst toward process improvements using generative artificial intelligence (GenAI) without fully anticipating potential regulatory and cybersecurity vulnerabilities.

This was one of the observations to emerge from "Cyber at a Crossroads: Risk and Rewards for Insurers," a recent webinar hosted by the technology consultancy Datos Insights.

"There's so much hype" around artificial intelligence right now, said Cybersecurity Practice Director John Horn, "but we're really not seeing the efficacy yet… It's early days."

Among other issues, insurance and financial services organizations may be overly focused on the efficiencies afforded by artificial intelligence tools to recognize the threat of "adversarial AI," or AI tools that can be used against them, Horn said. "We expect underwriters to include an adversarial AI coverage, but most institutions wouldn't be able to detect an AI or GenAI attack if their lives depended upon it."

Why? Because it's nearly impossible to observe an AI cyberattack as it unfolds. As a result, information security officers and other C-Suite executives are reacting to the hype around AI but lack the operational experience or performance metrics necessary to create up-to-date cybersecurity guideposts.

Santander staff and customer data stolen in major cyber attack

Santander is the latest victim of a cyber attack – with hackers accessing data relating to all its staff and millions of overseas customers, the bank confirmed.

A hacking group was reportedly behind a similar data breach of Ticketmaster, which emerged earlier this week.

Certain information relating to all current and some former Santander staff – as well as customers in Spain, Chile and Uruguay – was accessed in the breach, the lender said.

“No transactional data, nor any credentials that would allow transactions to take place on accounts are contained in the database, including online banking details and passwords,” it said.

Santander employs about 200,000 people worldwide, including around 20,000 in the UK.

No customer data in the UK, or any other of its markets, were affected.

State Farm asks for stay in ACV case pending outcome of allegedly similar Progressive case

State Farm has requested an indefinite stay on discovery and proceedings in a lawsuit against it regarding allegations of undervalued total loss claims and reduced payments to claimants.

The request was made because of the pending appeal of a case against Progressive that would “review certifiability of auto total loss class actions alleging systematic underpayments of ‘actual cash value,’ just like this one,” State Farm’s motion states.

On behalf of a proposed nationwide class, the suit accuses Illinois-based State Farm of breach of contract, breach of covenant of good faith and fair dealing, unjust enrichment, and violations of Illinois’ Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/2.

Plaintiffs allege State Farm paid out 4-11% less than what was owed by applying a discount, or “typical negotiation adjustment,” to the actual cash value (ACV) of aggregated used vehicle internet prices similar to the ones involved in claims.

State Farm’s stay request includes its motions for summary judgment on some of the plaintiff’s individual claims.