Property and casualty insurers in North America saw their operating performance fall in the first half as COVID-19 impacted underwriting results and investment earnings, Fitch Ratings said.
The Annualized GAAP operating return on average equity was 2.8% versus 8.3% in the first half of 2019, with 16 of the 50 P&C insurers that Fitch tracks reporting a double-digit operating ROAE, down from 26 a year ago.
Despite an "unprecedented operating environment" and economic volatility caused by the virus, the underwriting results "represent an area of relative stability, reflecting the industry's robust risk management focus," said Fitch Director Christopher Grimes.
Losses from natural catastrophes and civil unrest outpaced claims from virus-induced losses, while overall losses remained manageable for most insurers, according to the report.
The group reported $6.8 billion of COVID-19-related incurred losses, which increased the group's overall combined ratio by 3.6% in the first half. Losses from natural catastrophes and civil unrest came in at $7.0 billion and $751 million, respectively.
Fitch expects reinsurers to absorb the largest relative increase in underwriting results from pandemic-related losses, reporting the largest segment increase tied to the virus at 9.7% of earned premiums in the first half.
The agency anticipates that operational and underwriting challenges are unlikely to subside in the rest of 2020.
Fitch's fundamental sector outlook for U.S. P&C insurers and global reinsurers remains negative as full-year results will potentially include further COVID-19-related claims, as well as possible large catastrophe losses and reported reserve deficiencies in liability lines.