The U.S. commercial auto insurance industry in 2016 recorded its worst underwriting performance since 2001, according to Fitch Ratings.
The segment's poor performance created a profit drag that was felt by a number of property and casualty insurers. Fitch Ratings Managing Director James Auden said that the headwinds of unfavorable claims trends in the commercial auto space more than offset the positive impacts of rate increases during the year. The commercial auto industry's combined ratio for 2016 came in at 110.4%.
Fitch said that inadequate reserving could be a result of poor pricing and slow recognition of moving loss trends. Adverse development in 2016 equaled 8.6% of earned premiums.
Fitch said a minimal improvement in accident-year loss ratios in the previous three years could indicate improved results in 2017. Reported accident-year loss ratios were 76.7% in 2016, three points better than in 2013. Even with improvement, however, Fitch does not anticipate the commercial auto industry recording underwriting profits in the near term.