4 Beaten-Down Insurance Stocks Poised For A Turnaround In 2021

The COVID-19 pandemic wreaked havoc in 2020, taking a huge toll on the economy. This was reflected in the decline in major indices this year.

Like most other industries, insurance too took a beating. Adding to the woes, a continued low rate environment and an active hurricane season weighed on the performance of insurers. The insurance industry has declined 7.2% year to date.

Per Verisk and the American Property Casualty Insurance Association (APCIA), the net income of the private U.S. property/casualty insurance industry declined 26% in the first half of 2020, largely attributable to the pandemic. Net underwriting gains too decreased, though net written premiums increased per the report.

However, since the third quarter of 2020, insurers have been witnessing a turnaround owing to reopening of the economy.

Also, frequent natural disasters accelerate the policy renewal rate and set the stage for increase in pricing. Per Colorado State University, the 2020 Atlantic hurricane season was expected to be extremely active with hurricane activity of about 190% of the average season. Per Willis Towers Watson’s Commercial Lines Insurance Pricing Survey, 23 U.S. commercial insurance lines are expected to witness price rise while five might see either increase, decreases, or flat renewals.

Per Willis Towers Watson’s 2021 Insurance Marketplace Realities report, except for one, all lines should witness a price rise next year.

Prudent underwriting through increased adoption of technology will ensure smooth functioning while maintaining social distancing norms. The property and casualty insurance industry in particular is witnessing the emergence of insurtech — technology-led insurers.

In fact, in the latest FOMC meeting, though interest rate was retained at a near-zero level with an indication of no raises until 2023, economic growth was estimated to be 4.2% in 2021. However, a low rate environment is likely to weigh on life insurers in 2021.

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