United States property and casualty insurers cut their underwriting expenses to the lowest level in a decade in 2024, helping to drive the industry’s combined ratio back below break-even, according to a new AM Best report.

The ratings agency said the underwriting expense ratio fell to 25.3 per cent, about two points lower than in 2020, contributing to a 96.6 combined ratio for the year.

AM Best credited lower acquisition and general expenses, increased digitalisation and remote-work policies with reducing operating costs. It noted that expense ratios have remained far more stable than loss ratios, which continue to swing with severe weather, supply-chain disruptions and other macroeconomic shocks.

“Insurers fought through this turbulence, and in 2024 their financial fortunes improved noticeably in terms of both underwriting and operating results,” said David Blades, associate director, AM Best. “The improvements were especially evident for those personal lines insurers that had experienced decidedly unfavourable results from 2021 to 2023.”

The findings are important for Bermudian-based insurers and reinsurers, which play a major role in absorbing US catastrophe losses. Its carriers have paid an estimated $700 billion to American policyholders since 2016.

AM Best said catastrophe losses have topped $100 billion globally for six straight years, with most occurring in the United States. As a result, underwriting volatility is driven mainly by losses rather than expenses, according to the report. That means risk selection and exposure management are increasingly important for markets with heavy American property portfolios.

The report also highlighted a 60 per cent jump in industry advertising spending in 2024, led by major personal-lines carriers. AM Best said these distribution costs sit largely with primary insurers, while expense trends for reinsurers remain steady in comparison.