What were U.S. casualty insurance results for 2024?

Calendar year 2024 stands out as a pivotal and uncertain moment for U.S. property and casualty (P&C) insurers, especially within the casualty lines, with the insurance industry reporting significant reserve deterioration. In the statutory annual statements for 2024, carriers reported $7.8 billion in adverse prior-year development (PYD) across all liability lines—approximately 1.5% of prior reserves.¹ This amount is more than double the $3.7 billion reported in 2023, which followed 17 consecutive years of favorable PYD, as shown below.

The overall $7.8 billion of adverse development in 2024 was driven by casualty lines, defined here as other liability occurrence, commercial auto, non-proportional reinsurance liability, and product liability occurrence. For those lines, adverse PYD reached $15.8 billion, the highest level on record for these segments. Favorable development in workers’ compensation (WC), totaling $6.4 billion, helped offset part of this impact, continuing a trend where WC has provided a stabilizing influence on overall liability results.

To put the 2024 results in focus, Figure 3 shows a breakdown of 2024 PYD by major liability line of business and highlights where adverse and favorable movements are concentrated. Casualty lines such as other liability occurrence and commercial auto showed the most significant adverse results, while WC continued to generate meaningful favorable development, partially offsetting the overall impact.

The size of the PYD for casualty lines raises uncertainty about the current market environment for this segment, as it represents a divergence from traditional expectations during hard market cycles.

A brief history of casualty insurance market cycles and reserve development

To understand the significance of the current results, it’s essential to revisit the history of market cycles in U.S. casualty insurance. Traditionally, the industry has swung between “soft” and “hard” markets, each with distinct characteristics:

• Soft markets have been characterized by abundant capital, competitive pricing, relaxed underwriting standards, and inadequate premium rates relative to underlying loss trends. In these periods, underpricing can lead to under-reserving and later adverse development.
• Hard markets have been triggered by capital shocks, significant losses, or regulatory/economic change, resulting in rising rates, tighter underwriting, and more conservative reserving practices. Historically, this conservatism has led to subsequent downward reserve development (i.e., favorable PYD) for policies written during the hard market, as actual losses come in lower than initially booked estimates.

To better illustrate how market cycles have influenced industry results over time, Figure 4 presents key metrics for each year from 1997 through 2024. It shows calendar year PYD for casualty lines, workers’ compensation, and the overall liability total. Figure 4 also compares the initial and current accident year (AY) loss ratios, highlighting how expectations have shifted, and includes investment income ratios as a percentage both of investable assets and of premium. Examining these trends side by side provides valuable context for understanding how underwriting, reserving, and investment conditions have shaped the industry’s performance during both hard and soft market periods.

With this context in mind, let’s examine how these patterns have played out during distinct market eras, and how each phase has shaped the industry’s approach to pricing and reserving.

• 1997–2001: The end of a long soft market era. From 1997 through 2001, the casualty insurance market was firmly in a soft phase, which began in the late 1980s. Investment income was strong—about 6% of investable assets—which encouraged insurers to accept higher initial AY loss ratios, typically set in the 80% range. However, over time, the booked loss ratios climbed to between 90% and 110%. Pricing standards deteriorated in this period, setting stage for the hard market that followed.
• 2002–2004: The post-9/11 hard market. The early 2000s brought a significant shift. Investment income declined to around 4%, and initial AY loss ratios dropped to approximately 66% as insurers sought to restore profitability. However, the industry faced substantial adverse PYD—particularly in 2002, when prior-year reserves were increased 9% to address deteriorating experience from the prior soft market years. This period was further challenged by increased catastrophe losses, a surge in directors and officers (D&O) and asbestos claims, and the financial aftermath of the September 11 attacks. Rates rose and underwriting tightened significantly in response.
• 2005–2009: Gradual softening. Following the hard market, conditions began to soften again. By 2008, favorable PYD and consistently strong loss ratios helped stabilize results. Initial AY loss ratios were around 65%, but those estimates were revised downward over time, generally landing between 55% and 60%. While casualty lines remained stable, liability results overall were favorable. Underwriting standards began to weaken, as the 2008 financial crisis reduced demand for insurance and insurers looked to grow with new products and new markets.
• 2010–2014: Soft market resurgence. The industry entered a softer phase. Initial AY loss ratios hovered around 65%, eventually reaching nearly 68%. Although there were small favorable prior year movements, the improving investment environment encouraged further erosion in rates and underwriting discipline.
• 2015–2019: A very soft market and the rise of social inflation. By the mid-to-late 2010s, market conditions were extremely soft. Investment income returns were down to about 3% of invested assets, and the initial loss ratios, initially booked at 65%–70%, eventually deteriorated to 75%–80%. This was largely due to the growing impact of social inflation, which drove adverse PYD in casualty lines. However, favorable developments in WC and other lines more than offset these adverse casualty results at the industry level.
• 2020–2022: A hard market with mixed results. The market hardened again in the early 2020s, as insurers took actions to raise rates in response to the impact of social inflation, catastrophic weather events, and investment income returns between 2.5% and 3.0%. Unlike past hard markets, however, where initial loss ratios were typically conservative and actual results improved over time, this phase saw unfavorable trends, particularly in casualty lines, as initial AY loss ratios of around 67% creeped up toward 70%. While adverse PYD continued for casualty, favorable results in WC helped offset some of the adverse impact.

The casualty insurance market from 2020 and onward: A departure from the norm

Returning to the $15.8 billion casualty PYD charge in 2024, the following table provides additional detail by accident year.

On a percentage basis, the increases for AYs 2015–2019 are the largest and estimates of ultimate cost for these years continue to rise. These soft-market years turned out to be worse than originally expected for the industry due to the impacts of the pricing environment and social inflation.

For AYs 2020–2023, widely considered hard market years for casualty, insurers are now experiencing significant upward reserve development. This is a marked departure from prior hard markets. Historically, hard markets have been followed by favorable reserve development, as insurers’ caution during the hardening phase led to over-reserving. In contrast, the current cycle is seeing reserves develop upward, despite elevated pricing and, presumably, more conservative booking.

This unusual pattern raises the possibility that the industry is now in a “hybrid market”—one where pricing and underwriting are tight, but adverse development persists due to factors such as social inflation, continued volatility in claims severity, or misestimation of the impact of rate increases. The ongoing rise in jury awards, litigation costs, and changing societal attitudes toward liability have pushed claim severity higher. These trends have proven difficult to anticipate and reserve for.

Is the casualty insurance industry adequately reserved?

Given the recent trends in adverse PYD, a natural question arises: Is the industry currently adequately reserved for casualty? One useful metric for evaluating reserve strength is the survival ratio—the ratio of booked unpaid losses to paid losses at a specific evaluation point, in this case the end of the accident year. A higher survival ratio when compared to prior years may suggest a more conservative reserving position, as it indicates a greater cushion of unpaid losses relative to paid claims.

Figure 6 compares the survival ratios for AYs at the 12-month evaluation, i.e., the unpaid amount for each accident year divided by the paid amount at the end of the accident year. This is shown in two ways: The bars show the ratios using the unpaid amounts originally booked at the end of each accident year, and the orange lines show this ratio based on the implied unpaid loss at AY-end based on the latest booked figures (i.e., with hindsight).

When looking at Figure 6, two observations stand out:

• The ratio is increasing over time, particularly when viewing the latest booked ratios. This suggests that the claims settlement lag is lengthening, perhaps due to increased litigation activity.
• The survival ratio for AY 2024, at 9.5, is a marked increase from prior accident years. This suggests that, at least as of the first year of loss development, the industry’s reserves for AY 2024 are stronger relative to paid losses than previous years, whether judged by historical booking practices or by updated figures.

While a high survival ratio does not guarantee that reserves will ultimately prove adequate for AY 2024, it does indicate that the industry has responded to recent adverse development by booking more adequately at the onset of the AY. This should provide some reassurance that carriers are actively seeking to strengthen their reserve adequacy, even as uncertainty persists regarding long-term claim trends and the impact of social inflation.

2025 U.S. casualty reserve development: The uncertain road ahead

Looking forward, the industry faces important challenges. Pricing discipline must be maintained, and the effects of social inflation need to be brought under control. If the favorable PYD in WC begins to moderate, insurers may be forced to take corrective action to improve casualty performance. Sustained loss ratios hovering around 70% may no longer be acceptable, particularly if investment income remains constrained.

¹ This analysis is based on NAIC Annual Statement data, as compiled by S&P Global Market Intelligence. “Liability lines” in this article includes the following Schedule P lines of business: other liability—occurrence, other liability—claims made, commercial auto, non-proportional reinsurance liability, non-proportional reinsurance financial, medical professional liability (occurrence and claims made), product liability (occurrence and claims made), special liability, and workers’ compensation. “Casualty lines” is a subset of “Liability” that includes other liability—occurrence, commercial auto, non-proportional reinsurance liability, and product liability—occurrence.