State Farm Mutual Automobile Insurance Co. is the largest global property and casualty insurer with $77.59 billion of direct premiums written, according to a new ranking by S&P Global Market Intelligence.

US companies dominated the top 50 nonlife insurers, taking 20 of the global spots and accounting for more than 40% of total premiums. China accounted for the next-largest share of premiums, at 12.4%, and it is also home to the world's second-largest property and casualty (P&C) insurer: The People's Insurance Co. (Group) of China Ltd.

Buoyed by the US, North America dominated the top 50 list, accounting for almost 46% of premiums globally. European companies accounted for 33.5%, while Asia represented 20.7% of premiums.

Companies are ranked by 2022 property and casualty gross premiums written where available. Property and casualty gross premiums earned, net premiums written, net premiums earned, or statutory direct premiums written are used respectively when a company did not report gross premiums written. Premiums are based on originally reported values, which may differ to any restated value due to accounting changes such as the adoption of International Financial Reporting Standards outside the US.

Premiums are converted to US dollars at the average currency exchange rate for fiscal year 2022. Analysis is a best-efforts basis limited to public insurance companies around the world and nonpublic insurance companies in North America and Europe. Follow this link to download the data in Microsoft Excel.

Difficult conditions

 The global P&C insurance industry is facing one of the toughest operating environments in recent memory. Geopolitical, macroeconomic and environmental instability are conspiring to push up claims costs and make investment returns unpredictable.

"At least in my insurance career, the amount of challenges that are coupled together is pretty unprecedented," Nathalia Bellizia, global leader for insurance corporate finance and strategy at Boston Consulting Group (BCG), said in an interview.

The difficult trading conditions are prompting companies to make big changes. In May, table topper State Farm's California subsidiary stopped writing new P&C policies in the state, except for personal auto coverage. The insurer said it made its decision because of "historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market."

These challenges appear to be dragging on, with no signs of easing on the pricing front. Reinsurers have been raising prices and shrinking coverage throughout 2023, leaving insurers with more risk and volatility.

Natural catastrophes are becoming more frequent and severe every year, which will result in reinsurance costs continuing to rise. "I can't see that increasing trend dissipating anytime soon," Mohammad Khan, partner and head of general insurance at PwC in the UK, said in an interview.

As growth in premiums allows insurers to afford the increase for now, the question is how long this will continue as "reinsurance prices are rising faster than insurance prices generally around the world," Khan said.

Room for improvement

For the most part, the insurance industry has weathered the difficult operating environment.

"You see the industry actually proving to be quite resilient and delivering return, on average, close to its cost of capital across the board," Bellizia with BCG said.

In personal lines, insurers have struggled to charge adequate premiums, particularly in the US, where pricing is regulated by state. The challenges in this segment have been "a lot more acute" than in commercial lines, Bellizia noted, adding that double-digit rate increases are now earning in, and combined ratios have started to fall.

There is still room for improvement. As reinsurers have pulled back cover, insurers are paying more attention to what their underwriting looks like without taking reinsurance benefits into account.

"The use of data and technology and modeling becomes even more important," Guru Johal, lead partner for global specialty and reinsurance markets at Deloitte, said in an interview. There is an appreciation in the industry about the need for better modelling for risks such as man-made catastrophes and cyber, Johal said.

Buyers and sellers

The challenging conditions are focusing top executives' minds on the types of business they want to keep or discard, providing fuel for M&A.

Those with a lower appetite for earnings volatility may want to exit high-risk, high-return areas such as reinsurance, as American International Group Inc. did with its sale of Validus Holdings' treaty reinsurance business to RenaissanceRe Holdings Ltd.

"In a period where there is greater uncertainty, there is always more change within what global insurers will write and the composition of their portfolios," Khan said.

Equally, companies will look to expand the areas they have decided to keep. Rising geopolitical tensions, fueled more recently by the outbreak of the Israel-Hamas war, may slow down acquisitions, Isabelle Santenac, global insurance leader at EY, said in an interview.

Any pause is expected to be short-lived. "If it's slowing down, it will be temporary because … all the clients I have talked to in the last few months, all are discussing about inorganic growth," Santenac said.

M&A is likely to increase in 2024, as "there's some pent-up demand," Johal added.

While the level of global upheaval is making the going tough for property and casualty insurers, it is also serving as a reminder to their customers why they buy insurance.

"I don't see volatility in the world reducing at the moment. That results in insurance being more relevant," Johal said.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.