We are pleased to summarize key year-end 2024 financial results for U.S. commercial auto liability writers based on data available from S&P Global Market Intelligence. Milliman’s composite of commercial auto liability writers includes 40 companies or groups of companies, each with 2024 commercial auto liability direct written premium (DWP) of more than $280 million. This selected composite represents nearly 80% of the total commercial auto liability DWP volume for the industry in 2024. The metrics we reviewed show a resurgence in the annual growth rate of DWP as insurers continue to make rate increases, adverse one-year reserve development, and upward pressure on the calendar year loss and defense and cost containment expense (DCCE) ratios.
Historically, commercial auto liability results have been problematic, as indicated by the consistent loss ratio deterioration within most accident years. This has been fueled in recent years by a continued marketing presence of the plaintiffs’ bar concerning bodily injury claims stemming from large trucking events, increasing third-party litigation funding, driver distraction, social inflation driving settlement decisions, and economic inflation influencing property damage liability, among other factors. All of these issues have had a significant impact on loss trend rates, leaving actuaries with the difficult task of calibrating a commercial auto severity trend that is not represented in historical data.
The industry has looked to remedy the situation by taking rate increases in recent years, but the overall increase in premium has not kept up with loss costs. After a brief reprieve in 2020 and 2021, primarily due to pandemic-related frequency decreases, the commercial auto industry appears to have reverted to experiencing higher loss ratios in 2022 through 2024. As a result, several large insurers have begun to take action by significantly reducing exposures or exiting higher-risk sectors (e.g., long-haul trucks, certain states) in the last couple of years in an attempt to reign in loss ratios. Nationwide, for example, exited its primary E&S commercial auto business in 2023, citing problematic combined ratios. The industry will certainly be keeping a close eye on how these decisions will influence the commercial auto liability landscape in 2025 and beyond.
It should be noted that the data for this composite of insurers have been aggregated to reflect any historical acquisitions, such that the historical data are on a basis similar to the current data.
DWP growth ramps back up
Commercial auto liability DWP for this composite increased to just over $43 billion in 2024, an increase of 12.3% compared to 2023. This double-digit growth comes after a year in which the increase did not exceed the change in DWP across all lines of business, a rarity for the commercial auto liability industry in recent years. Figure 1 displays the total commercial auto liability DWP for this composite, along with the change from the prior year, compared to all lines of business for the top 40 commercial auto liability writers.
Figure 1: Top 40 commercial auto liability writers – DWP ($ billions)
Rate increases remained prevalent during 2024 with the average annual rate increase outpacing overall premium growth for a second year in a row. This continues to support the assertion that some carriers are reducing exposure as rate increases have not been able to keep pace with severity trends. Figure 2 displays countrywide approved and indicated rate changes from individual company rate filings for commercial auto coverage, along with the countrywide direct loss and DCCE ratio for commercial auto coverage. Note that the rate changes include both liability and physical damage premium, while the DWP in the prior figure only summarizes liability coverages.
Figure 2: Countrywide direct loss & DCCE ratio and non-zero approved and indicated rates – commercial auto
Note: Reflects averages weighted by number of policyholders affected.
When an individual company has filed more than once during a submission year, rate changes have been aggregated across the filings.
Overall, the commercial auto industry has seen average approved rate changes consistently above 5% each year for the last decade, with 2023 and 2024 seeing double-digit rate increases. Notably, the average indicated rates have suggested that the rate need each year has been even higher than the approved rate, with indications implying annual rate need higher than 10% since 2017. Despite the notable rate increases, loss ratios have continued to trend upward, with the exception of 2020 and 2021, which were influenced by the COVID pandemic. The highest approved and indicated rates in recent years were observed in 2024, and it remains to be seen whether this will be enough to curb the adverse loss ratio trend.
In 2023, almost 20% of the carriers in the composite observed a decrease in DWP despite industry-wide rate increases, further supporting the assertion that some major commercial lines writers have reduced their exposure in the commercial auto market. Four of the carriers with premium decreases in 2023 also saw DWP decreases in 2024, two of which had consecutive years of double-digit decreases. It remains to be seen whether other carriers follow suit in 2025 and beyond or whether they will attempt to improve the underwriting results with further rate increases and more targeted underwriting strategies, such as those mentioned in the next section.
Upward pressure on loss ratios continues
Commercial auto liability remains a particularly difficult segment for many insurers, as loss ratios remain well above other lines of business. Social inflation continues to cause severity to creep upward, and third-party litigation funding continues to put pressure on defense teams to accept higher settlement agreements instead of risking a trial or bad faith claims. As a result, the 2024 countrywide commercial auto liability calendar year loss and DCCE ratio (CYLR) continued its upward trend from 2020 and 2021, two years that saw some loss ratio relief due to lower frequency observed during the pandemic. While 2024 marked another year with increasing loss ratios, the rate of increase was less pronounced compared to previous years.
Despite the overall increase in loss ratio, there are pockets of the commercial auto industry that have found ways to successfully underwrite and price the risks, aided by the acceptance of new sources of data and technological advancements. Figure 3 maps the change in the spread of the composite’s CYLR over the last five years through box-and-whisker plots. The countrywide 2024 weighted average CYLR for the commercial auto liability industry increased to about 86%, the highest in the last five years, and the median 2024 CYLR increased to about 81%. It appears that there has been some stability in loss ratios for the 25th percentile and lower; however, loss ratios for carriers in the 75th percentile and higher have drifted further upward. Looking at the very highest and lowest loss ratios, the 90th percentile of loss ratios from this composite increased from 105% to 120%, while the 10th percentile saw only a slight increase. Rising severities and continued adverse reserve development are amongst the greatest contributors to this deterioration of CYLR.
Figure 3: Top 40 commercial auto liability writers – direct CYLR
Figure 4 shows commercial auto liability direct CYLRs for each of the last five years on a countrywide basis and for several of the largest states. Two states that experienced some of the most significant deterioration in their CYLRs were New York and Pennsylvania, while Florida saw a substantial improvement in its CYLR for the first time since 2021. Part of the deterioration in New York can be attributed to American Transit Insurance Company, a large insurer of taxi cabs and the second-largest insurer in the state of New York (by direct earned premium volume in 2024), which is under insurance regulatory order as of this writing. Of the top 30 states in commercial auto liability premium volume, only 10 saw an improvement in their 2024 CYLRs compared to 2023.
Figure 4: Commercial auto liability total industry – direct CYLR
Due to the factors mentioned previously (i.e., social inflation, third-party litigation funding, etc.), commercial auto liability accident year net loss and loss adjustment expense (LAE) ratios have continued to develop adversely for each accident year back to 2016, as historical data have not been representative of the higher trends observed in recent years. The accident year loss ratio for 2024 has initially been estimated at 80.3%, a slight decrease from the initial accident year 2023 loss ratio a year ago—the first such decrease in the last five years. However, it is too early to draw conclusions about whether this is an indication of better pricing and underwriting, especially considering the upward development historically observed in later development periods. Figure 5 displays up to five years of development of the net ultimate loss and LAE ratio for 2016 and subsequent.
Figure 5: Top 40 commercial auto liability writers – accident year net ultimate loss and LAE ratio by annual statement (AS) year
Prior-year reserve development remains adverse
The commercial auto cohort has observed flat or slightly favorable one-year reserve development relative to net earned premium for all lines of business in each of the last five years. However, the ratio of one-year reserve development to net earned premium for commercial auto liability continues to be adverse (see Figure 6), with 2024 showing an 8.0% one-year reserve development.
When pricing policies, insurers rely to some extent on experience from prior accident years, adjusted for loss development, loss and exposure trends, and historical rate changes. If the trend of adverse reserve development continues, the resulting indicated rates may be inadequate.
Figure 6: Top 40 commercial auto liability writers – one-year reserve development
Figure 7: Top 40 commercial auto liability writers – net IBNR to case ratios by AS year
To further assess whether the adverse reserve development might continue, it is useful to look at the incurred but not reported (IBNR) to case reserve ratios over time. When initially looking at the ratio from AS year 2024, shown in Figure 7, one might draw the conclusion that the current year reserves are more adequate than prior years, as the IBNR to case ratio is notably higher than past years. However, when the IBNR was restated to reflect the adverse reserve development shown in Figure 7, the IBNR to case ratios display a decreasing trend by accident year, as shown in Figure 8. This may imply that the current reserves are inadequate and that future adverse development will continue. Another perspective may suggest that companies are establishing higher case reserves to reflect the higher severity trend observed in recent years, hence less IBNR is required relative to case reserves. The case reserving methodology and adequacy will continue to vary by insurance company, and only time will tell if the industry has begun to correct the years of adverse development.
Figure 8: Top 40 commercial auto liability writers – hindsight net IBNR to case ratios by accident year
Policyholders’ surplus (PHS) grows again in 2024
PHS for this composite increased by 6.3% in 2024 after a comparable 6.6% increase in 2023. The decrease in PHS during 2022 was primarily attributable to macroeconomic factors, such as rising inflation, that led to prominent levels of unrealized capital losses for the entire industry and increased underwriting losses from catastrophes, such as Hurricane Ian. While commercial auto liability underwriting results did not improve in 2024, profitability in other lines of business, coupled with investment gains, helped PHS increase across virtually the entire insurance sector. Many of the companies included in this composite write multiple lines of business, and, therefore, it should not be inferred that the change in PHS for this composite is a direct result of commercial auto liability experience. Figure 9 displays the total PHS for this composite, along with the percentage change from the prior year.
Figure 9: Top 40 commercial auto liability writers – PHS ($ billions)
Commercial auto liability in 2025 and beyond
The commercial auto industry continued to face significant challenges in 2024, including persistently high loss ratios, the influences of social inflation and third-party litigation funding, and adverse one-year reserve development, among others. As these challenges have adversely influenced loss ratios, DWP has still shown robust growth, rising 12.3% from 2023 to 2024 within Milliman’s aforementioned composite. This growth is aided by substantial rate increases, reaching double digits on average in both 2023 and 2024. The effects of these trends, both positive and negative, on the commercial auto results for 2025 and beyond remain uncertain. As actuaries evaluate their commercial auto experience, they must carefully consider historical selections of loss development and trends given the ever-evolving and often problematic commercial auto landscape.