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Insurers risk insolvency if expenses and losses continue to climb – report

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The brief also warned that if insurers’ losses and expenses continue to climb “by too much for too long, they risk insolvency.”

Triple-I also underlined in its paper that insurers do more than just pay claims; they also employ people which involve labor costs, and conduct business operations where supplies and energy costs are spent. If insurers are to remain in business, “they have to earn a reasonable profit.”

Insurance premiums are not just affected by just inflation costs, the paper continued. The frequency and severity of claims auto insurers process, as well as the increased prevalence of attorney involvement also play major roles in increased auto insurance premiums. Meanwhile, worsening natural disasters are affecting the homeowners’ insurance market. Triple-I cited data from Swiss Re, which found that of the $270 billion in economic losses suffered due to natural disasters in 2021, $111 billion was insured.

“Much of this loss trend is due to people moving into risk-prone areas. More people, homes, businesses, and infrastructure means more costly damage when extreme events occur. More damage to insured properties means more and larger claims,” said Triple-I.

But because of the way insurers are regulated, options for responding to escalating claims apart from raising rates are “severely limited,” the brief suggested. And without “substantial” rate increases, insurers may be forced to draw from their policyholder surplus or write less coverage. The institute has warned that these trends “make it likely” that both home and auto insurance premium rates will rise significantly in years to come.

With premium increases out of the question, Triple-I believes that mitigation is crucial to contain or reduce premium rates.

In an interview with Insurance Business last year, Triple-I president and CEO Sean Kevelighan said that the insurance industry is at a crossroads, where everyone is moving “from repairing post-catastrophe to predicting and preventing.”

“I think our ability to get ahead of the catastrophes is going to be a key theme,” said Kevelighan. “Predicting and preventing will allow the industry to adapt to customers’ needs in a riskier world.”


The brief also warned that if insurers’ losses and expenses continue to climb “by too much for too long, they risk insolvency.”

Triple-I also underlined in its paper that insurers do more than just pay claims; they also employ people which involve labor costs, and conduct business operations where supplies and energy costs are spent. If insurers are to remain in business, “they have to earn a reasonable profit.”

Insurance premiums are not just affected by just inflation costs, the paper continued. The frequency and severity of claims auto insurers process, as well as the increased prevalence of attorney involvement also play major roles in increased auto insurance premiums. Meanwhile, worsening natural disasters are affecting the homeowners’ insurance market. Triple-I cited data from Swiss Re, which found that of the $270 billion in economic losses suffered due to natural disasters in 2021, $111 billion was insured.

“Much of this loss trend is due to people moving into risk-prone areas. More people, homes, businesses, and infrastructure means more costly damage when extreme events occur. More damage to insured properties means more and larger claims,” said Triple-I.

But because of the way insurers are regulated, options for responding to escalating claims apart from raising rates are “severely limited,” the brief suggested. And without “substantial” rate increases, insurers may be forced to draw from their policyholder surplus or write less coverage. The institute has warned that these trends “make it likely” that both home and auto insurance premium rates will rise significantly in years to come.

With premium increases out of the question, Triple-I believes that mitigation is crucial to contain or reduce premium rates.

In an interview with Insurance Business last year, Triple-I president and CEO Sean Kevelighan said that the insurance industry is at a crossroads, where everyone is moving “from repairing post-catastrophe to predicting and preventing.”

“I think our ability to get ahead of the catastrophes is going to be a key theme,” said Kevelighan. “Predicting and preventing will allow the industry to adapt to customers’ needs in a riskier world.”

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