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Despite rises in premiums, P&C insurers are struggling to stay profitable. Growing losses are outpacing premium hikes, and individual catastrophe events are happening more frequently and generating greater losses than before, causing some insurers to pull out of high-risk markets.    

A September 2023 report from Fitch Ratings estimates that the U.S. commercial auto insurance segment’s combined ratio (CR) will exceed 106 percent in 2023, further noting that the segment has posted a CR of over 100 percent in 11 of the last 12 years. The only exception was 2020, when pandemic-related lockdowns factored into a noteworthy decline in commercial auto liability claims.   

Combined ratio, a standard measure of underwriting profitability, is calculated by dividing the total of all incurred losses by the earned premium. The break even point, where total losses equal total premiums collected, comes out to 100 percent. Any number above 100 percent indicates that an insurance company is paying out more than it’s receiving; any number below 100 percent indicates it’s making a profit.

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