Annual Report on the Insurance Industry

FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY 

Completed pursuant to Title V of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act

SEPTEMBER 2022
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TABLE OF CONTENTS

EXECUTIVE SUMMARY...................................................................................................... v

I. INTRODUCTION............................................................................................................ 1

The Structure of this Report .......................................................................................... 1

Federal Insurance Office ............................................................................................... 1

Insurance Regulation and the Federal Insurance Office......................................... 1

FIO Activities......................................................................................................... 3

Box 1: FIO Cyber Insurance Initiatives................................................................. 7

II. INSURANCE INDUSTRY FINANCIAL OVERVIEW AND OUTLOOK................... 9

Domestic Insurance Marketplace Overview and Outlook ............................................ 9

Financial Performance and Condition Overview ................................................. 10

Life and Health Sector.......................................................................................... 14

Box 2: Increased Focus on Private Equity in the Life Insurance Sector............. 37

Property and Casualty Sector ............................................................................... 38

Box 3: Cyber Insurance Market........................................................................... 40

Market Performance ............................................................................................. 57

Domestic Outlook................................................................................................. 58

Capital Markets Activity ............................................................................................. 60

Financings............................................................................................................. 60

Mergers & Acquisitions of U.S. Insurers............................................................. 61

Alternative Risk Transfer Insurance Products...................................................... 62

International Insurance Marketplace Overview and Outlook ..................................... 62

III. CONCLUSION.............................................................................................................. 66
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GLOSSARY

A&H .......... Accident and Health

ABS .......... Asset-Backed Securities

CISA .......... Cybersecurity and Infrastructure Security Agency

CLO .......... Collateralized Loan Obligation

CMBS .......... Commercial Mortgage-Backed Securities

Dodd-Frank Act .......... Dodd-Frank Wall Street Reform and Consumer Protection 

Act of 2010

FACI .......... Federal Advisory Committee on Insurance

Federal Reserve .......... Board of Governors of the Federal Reserve System

FEMA .......... Federal Emergency Management Agency

FIO .......... Federal Insurance Office

FSOC .......... Financial Stability Oversight Council

GAO .......... U.S. Government Accountability Office

GDP .......... Gross Domestic Product

Health sector .......... Health sector includes companies licensed solely as health 

insurers or as health maintenance organizations

IAIS .......... International Association of Insurance Supervisors

ICS .......... Insurance Capital Standard

InsurTech .......... The innovative use of technology in connection with 

insurance

IPO .......... Initial Public Offering

L&H .......... Life and Health 

M&A .......... Mergers and Acquisitions

MitFLG .......... Mitigation Framework Leadership Group

NAIC .......... National Association of Insurance Commissioners

OECD .......... Organisation for Economic Co-operation and Development

P&C .......... Property and Casualty

RBC .......... Risk-Based Capital

Report .......... FIO, Annual Report on the Insurance Industry (2022)

S&P Global .......... S&P Global Market Intelligence

Secretary .......... Secretary of the Treasury

SIF .......... Sustainable Insurance Forum

TRIA .......... Terrorism Risk Insurance Act of 2002, as amended

TRIP .......... Terrorism Risk Insurance Program

Treasury .......... U.S. Department of the Treasury
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TABLE OF FIGURES

Figure 1: Total Direct Premiums Written in L&H and P&C Sectors .............................10

Figure 2: L&H Insurance Groups by 2021 U.S. Life Insurance Lines ...........................11

Figure 3: L&H Insurance Groups by 2021 U.S. A&H Lines Direct 

Premiums Written...........................................................................................11

Figure 4: P&C Insurance Groups by 2021 U.S. Combined Lines Direct 

Premiums Written...........................................................................................12

Figure 5: P&C Insurance Groups by 2021 U.S. Personal Lines Direct 

Premiums Written...........................................................................................13

Figure 6: P&C Insurance Groups by 2021 Commercial Lines Direct 

Premiums Written...........................................................................................13

Figure 7: Health Insurance Groups by 2021 Direct Premiums Written ..........................14

Figure 8: L&H Sector Net Premiums, Considerations, and Deposits.............................16

Figure 9: 2021 Composition of Net Premiums and Annuity Considerations for 

the L&H Sector ..............................................................................................16

Figure 10: L&H Sector Expenses ($ thousands).............................................................17

Figure 11: L&H Sector Annual Net Investment Income and Net Yield on Invested 

Assets..............................................................................................................18

Figure 12: Percentage Yield on 10-Year Treasury Bonds ..............................................19

Figure 13: L&H Sector Net Income ($ thousands) .........................................................20

Figure 14: L&H Sector Operating Ratios........................................................................21

Figure 15: L&H Capital and Surplus Position ($ thousands)..........................................22

Figure 16: Leading Determinants of Capital and Surplus for the L&H Sector...............23

Figure 17: Average Risk-Based Capital Ratios for the L&H Sector ..............................24

Figure 18: L&H Sector Leverage Ratios.........................................................................26

Figure 19: Growth of Alternative Investments Held by L&H Sector.............................28

Figure 20: Composition of L&H Sector..........................................................................29

Figure 21: Cash Flows from Operations for the L&H Sector.........................................31

Figure 22: A View of L&H Sector Liquidity..................................................................33

Figure 23: L&H Sector Portfolio of Asset-Backed Securities........................................35

Figure 24: P&C Sector Composite of Direct Premiums Written ....................................39

Figure 25: P&C Sector Direct Premiums Written...........................................................40

Figure 26: P&C Insurance Groups by U.S. Cyber Direct Premiums Written.................41

Figure 27: P&C Sector Combined Operating Ratios ......................................................42

Figure 28: Estimated Insured Property Losses, U.S. Catastrophic Events......................43
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Figure 29: Total One Year Reserve Development for the P&C Sector ..........................43

Figure 30: P&C Sector Annual Net Investment Income and Net Yield on 

Invested Assets...............................................................................................44

Figure 31: P&C Sector Net Income ................................................................................45

Figure 32: P&C Sector Operating Ratios........................................................................46

Figure 33: P&C Sector Leverage Ratios.........................................................................47

Figure 34: Composition of Asset Portfolio for P&C Sector ...........................................49

Figure 35: Composition of P&C Sector’s Investment Portfolio .....................................50

Figure 36: A View of P&C Sector Liquidity ..................................................................52

Figure 37: Growth of Alternative Investments Held by P&C Sector..............................53

Figure 38: P&C Sector’s Asset-Backed Securities .........................................................55

Figure 39: P&C Sector’s Affiliated Exposures...............................................................56

Figure 40: Insurance Industry Stock Price vs. S&P 500 .................................................57

Figure 41: Insurer Price/Book Value Ratios ...................................................................58

Figure 42: World Market Share 2019–2021 for Top Twenty Markets...........................63

Figure 43: Performance of Global Insurance Indices as Compared to Broader 

Market Average (S&P 500)............................................................................65
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EXECUTIVE SUMMARY

Introduction: This Report is submitted pursuant to the Dodd-Frank Wall Street Reform and 

Consumer Protection Act. The introduction outlines the Report’s structure, summarizes the 

authorities of the Federal Insurance Office (FIO), and describes certain FIO’s activities since its 

last Annual Report. 

Insurance Industry Financial Overview and Outlook: This section provides an overview of 

the financial performance and condition of the insurance industry in calendar year 2021. 

Domestic Insurance Marketplace Overview: The U.S. insurance industry was able to 

maintain its financial health during this period, despite the continuing effects of the COVID-19 

pandemic, higher inflation, and a changing interest rate environment. This section includes 

five subsections and a box, as follows: 

Financial Performance and Condition Overview: The overview describes the financial 

performance and condition of the U.S. insurance industry, including the 667 life and health

(L&H) insurers, the 2,651 property and casualty (P&C) insurers, and the 1,321 health 

insurers licensed in the United States during 2021. Insurers in the L&H sector offer 

products in two segments: (1) life insurance and annuities; and (2) accident and health 

products. Insurers in the P&C sector offer products that generally protect against the risk of 

financial loss associated with damage to property or exposure to liability for individuals, 

families or businesses. The Health sector includes companies licensed solely as health 

insurers or as health maintenance organizations. The overview includes information on the 

Health sector, but the subsequent detailed financial analyses are limited to the L&H and 

P&C sectors.

Direct premiums written in 2021 were approximately $819 billion for the L&H sector, $798 

billion for the P&C sector, and $908 billion for the Health sector. At the end of 2021, total 

assets held by the L&H sector were $8.5 trillion, by the P&C sector were $2.6 trillion, and 

by the Health sector were $735 billion.

The aggregate market shares of the top 10 and top 25 L&H insurers declined slightly in 

2021, while market share for the top 100 companies was little changed compared to 2020. 

On a combined basis, there was little year-over-year change in the composition of the top 10 

P&C companies, nor in the aggregate market shares of the top 10, 25, and 100 P&C 

companies. For the Health market, there was little change among the top writers in 2021. 

L&H Sector: This sub-section presents additional analysis of the financial performance of 

the L&H sector in 2021, and then assesses this sector’s overall financial condition as of 

December 31, 2021. 

Private Equity-Backed Insurers: Box 2 discusses how private equity-owned life insurers 

have continued to expand rapidly in the U.S. insurance industry and describes recent 

attention on private equity’s participation in the sector, including regulatory and policy 

initiatives.
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P&C Sector: This sub-section presents additional analysis of the financial performance of 

the P&C sector in 2021, and then assesses this sector’s overall financial condition as of 

December 31, 2021. 

Market Performance: This subsection describes the performance in 2021 of stock price 

indices for L&H and P&C insurers. Insurer indices underperformed as compared to the 

Standard & Poor’s 500 (S&P 500) and potential concerns about inflationary pressures, the 

economic environment, natural catastrophe losses, and the interest rate environment 

weighed on both sectors.. 

Domestic Outlook: This sub-section provides some insights into near- to medium-term 

trends, reflecting observations from 2021 and the first three months of 2022. 

Capital Markets Activity: The U.S. insurance industry continued to access the capital markets 

in 2021. During the year, 16 insurer-related public equity offerings were completed, with an 

aggregate value of $4.4 billion. Insurers also continue to access public debt markets, and issued 

debt securities at higher interest rates as general market rates increased. There were 67 and 

acquisition transactions announced in 2021 involving U.S. insurers and reinsurers, with a total 

value of $46.5 billion. The assets under management in the alternative risk transfer market at 

year-end 2021 were approximately $97 billion, an approximately $3 billion increase over 2020. 

Overall issuances of annual catastrophe bond and insurance linked securities in 2021 set a new 

annual record, at just under $20.3 billion.

International Insurance Marketplace Overview and Outlook: The United States remained 

the world’s largest single-country insurance market in 2021. When viewed as a single market, 

the combined share of the European Union (no longer inclusive of the United Kingdom) 

remained the next largest, followed by China. 

Conclusion: In the coming year, FIO will continue to monitor macroeconomic developments 

and assess their financial implications for the insurance industry. FIO will also continue to 

assess the affordability and availability of insurance products for traditionally underserved 

communities and consumers (particularly with respect to personal auto insurance and 

homeowners’ insurance), the role of the insurance industry in helping to improve our nation’s 

cybersecurity, climate-related financial risks and other relevant developments affecting the 

insurance industry, policyholders, and consumers.
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I. INTRODUCTION

This Report is submitted by the Federal Insurance Office (FIO) of the U.S. Department of the 

Treasury (Treasury) pursuant to Section 502(a) of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Dodd-Frank Act), which requires the annual submission by FIO of a 

report to the President, the Committee on Financial Services of the House of Representatives, 

and the Committee on Banking, Housing, and Urban Affairs of the Senate “on the insurance 

industry and any other information as deemed relevant by the [FIO] Director or requested by 

such Committees.”1

The Structure of this Report

This Report begins with an overview of FIO’s statutory responsibilities, then summarizes certain 

of FIO’s key activities since those described in its 2021 Annual Report on the Insurance 

Industry.

2

 Section II presents a discussion and analysis of the insurance industry’s financial 

performance in calendar year 2021 and its financial condition as of December 31, 2021. This 

financial discussion also includes an outlook for the domestic and international insurance 

markets, as well as developments in emerging issues that have bearing on the financial 

performance and condition of the domestic insurance industry. Section III concludes with 

anticipated areas for FIO’s focus in the coming year.

Federal Insurance Office

Insurance Regulation and the Federal Insurance Office

In the United States, the primary regulators of the business of insurance are the fifty states, the 

District of Columbia, and the five U.S. territories.

The federal government also plays an important role in the insurance industry, including through 

FIO.3

 Title V of the Dodd-Frank Act established FIO within Treasury.4 In addition to advising 

the Secretary of the Treasury (Secretary) on major domestic and prudential international 

insurance policy issues and having its Director serve as a non-voting member of the Financial 

Stability Oversight Council (FSOC), FIO is authorized to:

1 Federal Insurance Office Act of 2010 (FIO Act), 31 U.S.C. § 313(n)(2).

2 FIO, Annual Report on the Insurance Industry (2021), https://home.treasury.gov/system/files/311/FIO-2021-

Annual-Report-Insurance-Industry.pdf (2021 Annual Report).

3 The federal government also may have a significant impact on insurers through, among other things, the regulation 

of financial products or markets that include insurance (e.g., regulation of securities by the U.S. Securities and 

Exchange Commission (SEC)) and the taxation of insurers and their products.

4 FIO Act, 31 U.S.C. § 313(a). Title V also designates the Secretary as advisor to the President on “major domestic 

and international prudential policy issues in connection with all lines of insurance except health insurance.” Id. at 

§ 321(a)(9). 
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• monitor all aspects of the insurance industry, including identifying issues or gaps in 

the regulation of insurers that could contribute to a systemic crisis in the insurance 

industry or the U.S. financial system;

• monitor the extent to which traditionally underserved communities and consumers, 

minorities, and low- and moderate-income persons have access to affordable 

insurance products regarding all lines of insurance, except health insurance;

• recommend to FSOC that it designate an insurer, including the affiliates of such 

insurer, as an entity subject to regulation as a nonbank financial company supervised 

by the Board of Governors of the Federal Reserve System (Federal Reserve);

• assist the Secretary in the administration of the Terrorism Risk Insurance Program 

(TRIP), as established in Treasury under the Terrorism Risk Insurance Act of 2002, 

as amended (TRIA);

• coordinate federal efforts and develop federal policy on prudential aspects of 

international insurance matters, including representing the United States, as 

appropriate, in the International Association of Insurance Supervisors (IAIS) and 

assisting the Secretary in negotiating covered agreements;

• determine whether state insurance measures are preempted by covered agreements;

• consult with the states (including state insurance regulators) regarding insurance 

matters of national importance and prudential insurance matters of international 

importance; and

• perform such other related duties and authorities as may be assigned to FIO by the 

Secretary.5

In addition, before the Secretary may make a determination as to whether to seek the 

appointment of the Federal Deposit Insurance Corporation as receiver of an insurer under Title II 

of the Dodd-Frank Act, the Secretary must first receive a written recommendation from the FIO 

Director and the Federal Reserve.6 Also, FIO and the Federal Reserve coordinate on the 

performance of annual analyses of nonbank financial companies supervised by the Federal 

Reserve, particularly with respect to stress testing, to evaluate whether such companies have the 

capital, on a consolidated basis, necessary to absorb losses as a result of adverse economic 

conditions.7

5 FIO Act, 31 U.S.C. § 313(c)(1).

6 Dodd-Frank Act, 12 U.S.C. § 5383(a)(1)(C).

7 12 U.S.C. § 5365(i)(1)(A).
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FIO is authorized to collect data and information on and from the insurance sector, including 

through the use of subpoenas.8

 FIO is also authorized to analyze and disseminate data and 

information and issue reports on all lines of insurance, except health insurance.9

In addition to its statutory authorities, FIO has several statutorily imposed reporting obligations. 

Beyond the reporting requirements in the Dodd-Frank Act (including for this annual report), the 

Economic Growth, Regulatory Relief, and Consumer Protection Act directs the Secretary and the 

Federal Reserve Chairman (or their designees) to submit an annual report to Congress on their 

efforts with respect to global insurance regulatory or supervisory forums.10 The Act also 

requires the Secretary and Federal Reserve Chairman (or their designees) to report to Congress 

on their efforts to increase transparency at IAIS meetings.11 In addition, the Act requires that, 

before supporting or consenting to the adoption of any final international insurance capital 

standard, the Secretary, the Federal Reserve Chairman, and the FIO Director—in consultation 

with the National Association of Insurance Commissioners (NAIC)—must complete a study and 

submit a report to Congress on the impact of any such standard on consumers and U.S. 

markets.12

FIO Activities

FIO released its last Annual Report on September 30, 2021.13 Certain of FIO’s key activities 

since the last Annual Report are summarized below.

On September 30, 2021, FIO released its 2021 Preemption Report noting that during the fiscal 

year ending September 30, 2021, FIO did not take any action regarding the preemption of any 

state insurance measures that were inconsistent with a covered agreement.14

On October 21, 2021, FSOC published its Report on Climate-Related Financial Risk, to which 

FIO staff contributed.15 In addition, FIO staff continue to participate in various FSOC 

8 31 U.S.C. § 313(e).

9 31 U.S.C. § 313(e).

10 Economic Growth, Regulatory Relief, and Consumer Protection Act, Pub. L. No. 115-174, § 211(c)(1)(A), 132 

Stat. 1296 (2018).

11 Economic Growth, Regulatory Relief, and Consumer Protection Act, § 211(c)(4).

12 Economic Growth, Regulatory Relief, and Consumer Protection Act, § 211(c)(3)(A).

State regulation of the insurance industry is coordinated through the NAIC, a voluntary organization whose 

membership consists of the chief insurance regulatory officials of the 50 states, the District of Columbia, and the 

five U.S. territories.

13 FIO, 2021 Annual Report. 

14 FIO, 2021 Preemption Report – Federal Insurance Office (September 30, 2021), 

https://home.treasury.gov/system/files/311/2021-Preemption-Report-FIO.pdf. 

15 See FSOC, Report on Climate-Related Financial Risk (2021), https://home.treasury.gov/system/files/261/FSOCClimate-Report.pdf. See also Treasury, “Financial Stability Oversight Council Identifies Climate Change as an 

Emerging and Increasing Threat to Financial Stability,” news release, October 21, 2021, 

https://home.treasury.gov/news/press-releases/jy0426. 
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committees, including the Climate-related Financial Risk Committee, and the FIO Director 

attends all meetings of FSOC principals.

On October 28, 2021, FIO participated in the fourth meeting of the Joint Committee under the 

U.S.-EU Covered Agreement.16

On November 2, 2021, the Sustainable Insurance Forum (SIF) published SIF Scoping Study: 

Nature-Related Risks in the Global Insurance Sector, to which FIO staff contributed.17 FIO staff 

continue to participate in various SIF workstreams.

November 15, 2021 was the deadline for comments in response to FIO’s request for information 

on climate-related risks and the insurance sector, which FIO published on August 31, 2021.18 

On November 18, 2021, Treasury published for public comment proposed revisions to the annual 

TRIP data call that would require the production of more detailed information concerning the 

participation of captive insurance companies in TRIP, as well more detailed information 

concerning cyber insurance in order to improve Treasury’s evaluation of cyber insurance within 

the scope of TRIP, including insurance and losses associated with ransomware.19 After 

considering the responses, FIO adopted the revised data collection forms as originally proposed 

and added to the instructions a provision clarifying first-year reporting expectations. 

On December 2, 2021, at a public meeting of the Federal Advisory Committee on Insurance 

(FACI),20 FIO staff presented their initial observations on the responses to FIO’s request for 

information on climate-related risks and the insurance sector, published on August 31, 2021 

(discussed above).21 FIO reported that it had received over 50 unique responses to its request, 

with over 5,300 signatories including over 95 organizations, made on behalf of over 900,000 

16 See Treasury, “United States and European Union Hold Fourth Joint Committee Meeting Under the Bilateral 

Agreement on Prudential Measures Regarding Insurance and Reinsurance,” news release, October 28, 2021, 

https://home.treasury.gov/news/press-releases/jy0441. 

17 SIF, SIF Scoping Study: Nature-Related Risks in the Global Insurance Sector (2021), 

https://www.sustainableinsuranceforum.org/view_pdf.php?pdf_file=wp-content/uploads/2021/11/UN_NatureRelated-Risks-in-the-Global-Insurance-Sector_v9.pdf. 

18 Federal Insurance Office Request for Information on the Insurance Sector and Climate-Related Financial Risks, 

86 Fed. Reg. 48814 (August 31, 2021), https://www.federalregister.gov/documents/2021/08/31/2021-18713/federalinsurance-office-request-for-information-on-the-insurance-sector-and-climate-related. 

19 Terrorism Risk Insurance Program 2022 Data Call, 86 Fed. Reg. 64600 (November 18, 2021), 

https://www.federalregister.gov/documents/2021/11/18/2021-25181/terrorism-risk-insurance-program-2022-datacall. 

20 FACI is a federal advisory committee tasked with making non-binding recommendations to FIO in performing its 

duties and authorities. FACI includes a cross-section of members representative of the views of state and nongovernment persons having an interest in the duties and authorities of FIO. More information on FACI—including 

its meeting agendas, minutes, and presentations—is available on FIO’s website. See “Federal Advisory Committee 

on Insurance (FACI),” Treasury, 

https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/federal-insuranceoffice/federal-advisory-committee-on-insurance-faci. 

21 FIO, “Insurance Sector and Climate-Related Financial Risk: Federal Insurance Office Request for Information” 

(presentation, FACI, Washington, DC, December 2, 2021), 

https://home.treasury.gov/system/files/311/FIO_FACI_Climate-Related%20Financial%20Risk.pdf. 
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organizations, affiliates, members, supporters, and individuals. FIO is continuing to use these 

responses to inform its ongoing climate-related work.

FIO staff contributed to FSOC’s annual report for 2021, published on December 17, 2021.22

On December 23, 2021, Treasury issued a Federal Register notice advising that TRIP’s insurance 

marketplace aggregate retention amount under TRIA for 2022 would be $42,690,205,453.23

FACI held a public meeting on February 17, 2022, at which FIO announced that it had joined the 

Network of Central Banks and Supervisors for Greening of the Financial System.24 At the same 

time, FIO announced its intent to publish a climate report by year-end 2022, focusing on 

insurance supervision and regulation of climate-related financial risks.

On March 3, 2022, Treasury’s Bureau of the Fiscal Service published a Notice of Proposed 

Rulemaking in respect of regulations concerning companies that serve as sureties for obligations 

to the United States.25 Among other aspects focused on modernization and reorganization of the 

surety regulations, the notice proposed allowing for the recognition of additional companies that 

can provide reinsurance to a Treasury-certified surety. In developing the proposed regulation, 

the Surety Bonds Branch coordinated with FIO. 

On March 30, 2022, on FIO’s behalf, Treasury published a request for comment from the 

insurance sector and other stakeholders on factors to be analyzed in the 2022 Report on the 

Effectiveness of the Terrorism Risk Insurance Program, as well as other issues relating to the 

effectiveness of TRIP.26

In April and May 2022, FIO conducted its annual data call in connection with TRIP, as required 

under TRIA, including more detailed information concerning captive insurer participation and 

cyber insurance, as proposed by FIO in November.27 All insurers participating in TRIP were 

required to submit information, subject to certain reporting exemptions. 

22 FSOC, 2021 Annual Report (2022), https://home.treasury.gov/system/files/261/FSOC2021AnnualReport.pdf. 

23 IMARA Calculation for Calendar Year 2022 Under the Terrorism Risk Insurance Program, 86 Fed. Reg. 73100 

(December 23, 2021), https://www.federalregister.gov/documents/2021/12/23/2021-27795/imara-calculation-forcalendar-year-2022-under-the-terrorism-risk-insurance-program. 

24 Treasury, “Treasury’s Federal Insurance Office Continues Efforts on Climate-Related Financial Risks in the 

Insurance Sector, Joins NGFS,” news release, February 17, 2022, https://home.treasury.gov/news/pressreleases/jy0598. 

25 Proposed Rule, “Surety Companies Doing Business with the United States,” 87 Fed. Reg. 12003 (March 3, 2022), 

https://www.federalregister.gov/documents/2022/03/03/2022-03937/surety-companies-doing-business-with-theunited-states. 

26 2022 Report on the Effectiveness of the Terrorism Risk Insurance Program, 87 Fed. Reg. 18473 (March 30, 

2022), https://www.federalregister.gov/documents/2022/03/30/2022-06681/2022-report-on-the-effectiveness-of-theterrorism-risk-insurance-program. 

27 TRIA § 104(h); 2022 Terrorism Risk Insurance Program Data Call, 87 Fed. Reg. 22026 (April 13, 2022), 

https://www.federalregister.gov/documents/2022/04/13/2022-07861/2022-terrorism-risk-insurance-program-datacall. 
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On May 10, 2022, Treasury and FIO hosted the 2022 annual meeting of the International Forum 

of Terrorism Risk (Re)Insurance Pools. The event was livestreamed and featured panel 

discussions addressing public/private partnerships in the wake of the COVID-19 pandemic, the 

potential interrelationship between climate change and terrorism risk, and the role of insurers in 

promoting resilience and better risk practices. The event featured closing remarks by Treasury 

Deputy Secretary Wally Adeyemo addressing the role of insurers in promoting better cyber risk 

practices.

On June 2, 2022, FACI held a public meeting at which FIO provided updates on its work at the 

IAIS, on TRIP, and on climate-related financial risk and the insurance sector.28

On June 29, 2022, FIO responded to an inquiry from Senator Sherrod Brown, Chairman of the 

Senate Banking, Housing and Urban Affairs Committee, regarding the growing role of 

alternative asset managers, such as private equity firms, in the U.S. insurance sector.29 In a 

subsequent press release, Senator Brown asked for continuing consideration of private equity’s 

growing role in the insurance industry.30

On June 30, 2022, FIO released its Report on the Effectiveness of the Terrorism Risk Insurance 

Program, informed by the feedback received from the March 30, 2022 request for comment 

together with the annual data calls.

31

On July 14, 2022, the fifth U.S.-EU Joint Committee Meeting was held.32

FIO continues to fulfill its statutory role representing the United States in the IAIS and elsewhere 

on prudential international insurance measures. Throughout 2021 and 2022, FIO continued its 

involvement in IAIS activities, including as a member of the IAIS Executive Committee. FIO’s 

work at the IAIS includes matters relating to the implementation of the Holistic Framework, the

monitoring period for the Insurance Capital Standard (ICS), the comparability work of the 

Aggregation Method to the ICS, and strategic planning for the IAIS. FIO also continued its 

engagement and leadership roles across a number of working groups and task forces at the IAIS 

on a variety of other issues, including matters relating to resolution of insurers, financial crimes, 

cybersecurity, climate risk, and diversity, equity, and inclusion. 

28 See “Federal Advisory Committee on Insurance (FACI),” Treasury.

29 Letter from Jonathan C. Davidson, Treasury Assistant Secretary for Legislative Affairs, to the Hon. Sherrod 

Brown (June 29, 2022), https://www.banking.senate.gov/imo/media/doc/fio_85.pdf. 

30 Senator Sherrod Brown, “Brown Continues Push on Private Equity Firms’ Involvement in the Insurance 

Industry,” news release, August 5, 2022, https://www.brown.senate.gov/newsroom/press/release/sherrod-browncontinues-push-private-equity-firms-involvement-insurance-industry. 

31 FIO, Report on the Effectiveness of the Terrorism Risk Insurance Program (June 2022), 

https://home.treasury.gov/system/files/311/2022%20Program%20Effectiveness%20Report%20%28FINAL%29.pdf

(2022 TRIP Effectiveness Report). 

32 Treasury, “United States and European Union Hold Fifth Joint Committee Meeting Under the Bilateral 

Agreement on Prudential Measures Regarding Insurance and Reinsurance,” news release, July 14, 2022, 

https://home.treasury.gov/news/press-releases/jy0867. 
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FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

7 

Internationally, FIO has remained engaged in the Insurance and Private Pensions Committee at 

the Organisation for Economic Co-operation and Development (OECD). The OECD serves as a 

source of public policy advice and analyses for global and regional forums, including the G20, as 

well as the general public, and collects and publishes statistical data and analyses on assorted 

topics.33 FIO also remains an active member of the EU-U.S. Insurance Dialogue Project. In 

addition, FIO participated in the U.S.-EU Joint Financial Regulatory Forums on September 29-

30, 2021; March 1-2, 2022; and July 13-14, 2022, and in the U.S.-UK Financial Regulatory 

Working Group meeting on December 15, 2021.34 FIO has also assisted with Treasury’s work 

with the G7 Cyber Expert Group. 

During 2021 and 2022, FIO continued to provide expertise to other federal agencies. For 

example, FIO provided technical assistance to the Federal Emergency Management Agency 

(FEMA) in connection with FEMA’s transfer of $1.064 billion of risk from the National Flood 

Insurance Program to the private reinsurance market in January 2022, and the related capital 

markets placement providing $450 million in coverage over three years.35 In addition, as a 

member of the Mitigation Framework Leadership Group (MitFLG), FIO continued to participate 

in MitFLG’s quarterly meetings and assist in the MitFLG’s implementation of its National 

Mitigation Investment Strategy.36 FIO also participates as a member of the Flood Resilience 

Interagency Working Group.37

Box 1: FIO Cyber Insurance Initiatives

Over the past year, FIO continued its ongoing efforts with regard to cyber insurance and insurer 

cybersecurity.38 Cyber insurance is an increasingly significant risk-transfer mechanism, and the 

33 See, e.g., “Insurance,” OECD, https://www.oecd.org/finance/insurance/. 

34 See, e.g., European Commission, “Joint Statement on the EU-U.S. Joint Financial Regulatory Forum,” news 

release, October 4, 2021, 

https://ec.europa.eu/info/sites/default/files/business_economy_euro/banking_and_finance/documents/211004-eu-usjoint-financial-regulatory-forum-joint-statement_en.pdf; Treasury, “Joint Statement on the U.S.-EU Joint Financial 

Regulatory Forum,” news release, March 7, 2022, https://home.treasury.gov/news/press-releases/jy0636; Treasury, 

“Joint Statement on the EU-U.S. Joint Financial Regulatory Forum,” news release, July 20, 2022, 

https://home.treasury.gov/news/press-releases/jy0882; Treasury, “Joint Statement on UK-U.S. Financial Regulatory 

Working Group,” news release, December 17, 2021, https://home.treasury.gov/news/press-releases/jy0540. 

35 See FEMA, “FEMA Announces Reinsurance Program to Manage Future Flood Risk in 2022,” news release, 

January 6, 2022, https://www.fema.gov/press-release/20220106/fema-announces-reinsurance-program-managefuture-flood-risk-2022; “National Flood Insurance Program’s Reinsurance Program,” FEMA, last updated March 

23, 2022, https://www.fema.gov/flood-insurance/work-with-nfip/reinsurance#capital-market. 

36 See “Mitigation Framework Leadership Group (MitFLG),” FEMA, https://www.fema.gov/emergencymanagers/national-preparedness/frameworks/mitigation/mitflg. 

37 See, e.g., White House, “Readout of the First White House Flood Resilience Interagency Working Group Meeting 

on Implementation of the Federal Flood Risk Management Standard,” news release, August 27, 2021, 

https://www.whitehouse.gov/ceq/news-updates/2021/08/27/readout-of-the-first-white-house-flood-resilienceinteragency-working-group-meeting-on-implementation-of-the-federal-flood-risk-management-standard/. 

38 For more on cyber insurance, see FIO, 2021 Annual Report, 74-77; FIO, 2022 TRIP Effectiveness Report, 59-74.
Annual Report on the Insurance Industry (September 2022)

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FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

8 

insurance industry has an important role to play in strengthening cyber hygiene and building 

resiliency, including combatting ransomware. 

Beyond ongoing stakeholder engagement and outreach, FIO has contributed to the development 

of Treasury’s counter-ransomware strategy. FIO also has advised other Treasury offices and 

federal agencies, including the White House Office of the National Cyber Director, about the 

role of cyber insurance.39

In June 2022, the Government Accountability Office (GAO) published a report noting cyber 

threats to U.S. critical infrastructure and flagging concerns about the adequacy of cyber 

insurance for systemic cyber events.

40 The GAO report observed that FIO and the Department 

of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA) “both have 

taken steps to understand the financial implications of growing cybersecurity risks.”41 The GAO

report concluded with recommendations that FIO and CISA work together “to produce a joint 

assessment for Congress on the extent to which the risks to the nation’s critical infrastructure 

from catastrophic cyberattacks, and the potential financial exposures resulting from these risks, 

warrant a federal insurance response.”42 FIO and CISA both accepted this recommendation and 

have begun work on this joint project. 

FIO’s cyber-related initiatives also include its administration of TRIP, since cyber insurance may 

be written in TRIP-eligible lines of insurance and therefore subject to TRIP. To evaluate 

changes in the cyber insurance market that could impact FIO’s administration of TRIP, in 2022 

FIO expanded the annual TRIP data call to request more detailed information concerning cyber 

insurance. With respect to cyber insurance, Treasury requested information in the TRIP data call 

on: (1) premiums and limits of policies written in both TRIP-eligible and non-TRIP-eligible lines 

of insurance, (2) premium and policy count information broken out by size of policyholder, 

(3) cyber extortion coverages, and (4) loss information for ransomware exposures. FIO’s 2022

Report on the Effectiveness of the Terrorism Risk Insurance Program discussed the results of the

expanded TRIP data call on cyber risk insurance and the state of the cyber insurance market,

including continued growth in the cyber insurance market, insurer exclusions for war and

systemic risk in light of recent litigation and the Russia-Ukraine conflict, and the passage in

March 2022 of legislation that will require mandatory reporting by critical infrastructure entities

of covered cyber incidents to CISA.43

39 See, e.g., Treasury, “Treasury Takes Robust Actions to Counter Ransomware,” news release, September 21, 2021, 

https://home.treasury.gov/news/pressreleases/jy0364#:~:text=Treasury%27s%20actions%20today%20advance%20the,close%20relationships%20with%2

0international%20partners; Treasury, “Treasury Continues Campaign to Combat Ransomware as Part of Whole-ofGovernment Effort,” news release, October 15, 2021, https://home.treasury.gov/news/press-releases/jy0410. 

40 GAO, Cyber Insurance: Action Needed to Assess Potential Federal Response to Catastrophic Attacks (June 

2022), https://www.gao.gov/assets/gao-22-104256.pdf. 

41 GAO, Cyber Insurance: Action Needed, 25.

42 GAO, Cyber Insurance: Action Needed, 33.

43 FIO, 2022 TRIP Effectiveness Report, 59-74.
Annual Report on the Insurance Industry (September 2022)

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FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

9 

II. INSURANCE INDUSTRY FINANCIAL OVERVIEW AND OUTLOOK

Domestic Insurance Marketplace Overview and Outlook

The financial analysis in this section, consistent with prior FIO annual reports, addresses the 

most recent calendar year, i.e., it focuses on the U.S. insurance industry’s financial performance 

and condition through December 31, 2021, the latest date for which detailed, comprehensive, and 

definitive data is available.44 As in previous reports, trends over the last 10 years have been 

analyzed as well.

In 2021, the United States was experiencing the ongoing effects of the COVID-19 pandemic. As 

COVID-19 restrictions were easing across the globe, companies struggled to balance supply 

chain constraints with changing demand, increasing inflationary pressures, and interest rate risk. 

The property and casualty (P&C) sector saw a weakening in its underwriting results as greater 

non-catastrophic losses were incurred compared to 2020, caused largely by increased severity in 

the personal auto business line from physical damage costs as more drivers returned to the 

roads.45 For the life and health (L&H) sector, surrender activity and benefit payments reached 

new heights, in part due to elevated COVID-19 mortality levels. Despite the challenging 

operating environment in 2021, the two sectors proved resilient and were supported by strong 

premium growth, stable current liquidity levels, and surplus expansion. 

The financial health of the L&H and P&C sectors in 2021 is illustrated in Figure 1, showing 

direct premiums written. Direct premiums written are the amount paid for insurance by 

policyholders and are a measure of sales activity and growth. With the exception of 2013 when 

direct business remained relatively flat, the U.S. insurance industry has shown positive yearover-year growth in direct premiums written since 2012. In 2021, the combined total direct 

premiums written in the L&H and P&C sectors was $1.6 trillion, which represented an eight 

percent annual increase and a 10-year high. 

44 Except as otherwise indicated, data cited in this section of the Report are as of December 31, 2021, as derived 

from S&P Global Market Intelligence (S&P Global) on June 24, 2022. These data are on a statutory accounting 

basis. S&P Global continuously updates its data for corrections in filings; 2021 data in this Report are based on 

updated data available as of June 24, 2022, and thus may be different in some respects from corresponding figures 

reported in FIO’s 2021 Annual Report. Due to certain conventions used by S&P Global for aggregation of industry 

data, some columns in the accompanying tables may not sum to the totals that have been separately accumulated by 

S&P Global from individual legal entity data. Some figures may not add to 100 percent due to rounding.

45 See, e.g., Fitch Ratings, “U.S. Auto Insurance Underwriting Results Take a Negative Turn,” FitchWire, March 4, 

2022, https://www.fitchratings.com/research/insurance/us-auto-insurer-underwriting-results-take-a-negative-turn04-03-2022. 
Annual Report on the Insurance Industry (September 2022)

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FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

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Figure 1: Total Direct Premiums Written in L&H and P&C Sectors

Source: S&P Global

Financial Performance and Condition Overview

This section addresses the financial performance and condition of the U.S. insurance industry, 

including the 667 L&H insurers, the 2,651 P&C insurers, and the 1,321 health insurers licensed 

in the United States during 2021. Insurers in the L&H sector offer products in two segments: 

(1) life insurance and annuities, which generally protect against the risk of financial loss 

associated with an individual’s death and provide income streams for retirement, respectively; 

and (2) accident and health (A&H) products, which cover expenses for health and long-term care 

or provide income in the event of disability. Insurers in the P&C sector offer products that 

generally protect against the risk of financial loss associated with damage to property or 

exposure to liability for individuals and families (personal lines) or for businesses (commercial 

lines). The Health sector includes companies licensed solely as health insurers or as health 

maintenance organizations. This overview includes information on the Health sector, but the 

subsequent detailed financial analyses are limited to the L&H and P&C sectors.

Direct premiums written for the L&H sector were approximately $819 billion in 2021, 

constituting 32 percent of direct premiums written for the combined L&H, P&C, and Health 

sectors.46 For the P&C sector, direct premiums written were approximately $798 billion, that is, 

32 percent of direct premiums written of the combined total for the three sectors. The Health 

sector reported $908 billion of direct premiums written for 2021, approximately 36 percent of the 

combined total for the three sectors.

46 Although Figures 2 and 3 suggest total L&H sector direct premiums were higher, this is due to potential doublecounting of some life insurance premiums and/or annuity considerations within the A&H lines, and some A&H 

premiums within the life insurance and annuities lines, as calculated by S&P Global. See also footnote 44.

$1.00

$1.10

$1.20

$1.30

$1.40

$1.50

$1.60

$1.70

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Direct Premiums Written

($ trillions)

Year
Annual Report on the Insurance Industry (September 2022)

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FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

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Figure 2 and Figure 3 show the 10 largest L&H insurance groups measured by direct premiums 

written, with the market share for life insurance (including annuities and other deposit-type 

contracts) and for A&H lines of business, respectively. Premiums shown in Figure 2 and Figure 

3 aggregate all L&H sector products and all geographies of the United States.

Figure 2: L&H Insurance Groups by 2021 U.S. Life Insurance Lines

Direct Premiums Written

2020

Rank

2021

Rank Insurance Group

2020 Direct 

Premiums Written

($000)

Share of 

Total (%)

2021 Direct 

Premiums 

Written ($000)

Share of 

Total (%)

1 1 MetLife $ 103,335,055 13.04 $ 97,860,893 11.32

2 2 Equitable Holdings 62,688,657 7.91 83,179,735 9.62

3 3 Prudential Financial Inc. 58,845,868 7.43 54,359,275 6.29

4 4 MassMutual 42,589,169 5.37 41,683,012 4.82

5 5 New York Life 40,211,642 5.07 38,855,736 4.49

12 6 Athene U.S. only 20,469,471 2.58 34,742,313 4.02

6 7

Principal Financial Group 

Inc. 26,452,290 3.34 26,535,819 3.07

8 8 Western & Sthrn Finl Grp 22,920,717 2.89 26,469,977 3.06

15 9 Nationwide 18,338,262 2.31 25,745,724 2.98

10 10 AIG 22,620,803 2.85 25,205,415 2.91

Combined Top 10 $ 427,924,760 54.00 $ 454,637,899 52.58

Combined Top 25 $ 637,570,918 80.46 $ 689,055,086 79.69

Combined Top 100 $ 782,340,264 98.73 $ 854,776,112 98.88

Total U.S. Life 

Insurance Lines $ 792,410,804 $ 864,702,869

Source: S&P Global (includes Life Insurance (No Annuity), Annuity Considerations, Deposit-type Contracts (State 

Page), Other Considerations (State Page)

Figure 3: L&H Insurance Groups by 2021 U.S. A&H Lines Direct Premiums Written

2020 

Rank

2021 

Rank Insurance Group

2020 Direct 

Premiums Written 

($000)

Share of 

Total (%)

2021 Direct 

Premiums 

Written ($000)

Share of 

Total (%)

1 1 UnitedHealth Group $ 58,072,742 27.78 $ 55,530,379 26.16

2 2 CVS Health Corp. 38,247,874 18.29 40,785,343 19.21

3 3 Cigna 21,422,657 10.25 22,765,888 10.72

4 4 MetLife 8,381,386 4.01 9,257,986 4.36

5 5 Unum Group 6,447,655 3.08 6,519,066 3.07

6 6 Aflac 5,450,426 2.61 5,218,020 2.46

7 7 Mutual of Omaha 4,936,066 2.36 5,160,383 2.43

8 8 Guardian 4,098,820 1.96 4,306,750 2.03

10 9 Sun Life Financial 3,132,441 1.50 3,430,684 1.62

11 10 The Hartford 2,999,988 1.43 3,283,555 1.55

Combined Top 10 $ 153,344,795 73.34 $ 156,258,054 73.61

Combined Top 25 $ 184,938,793 88.45 $ 188,841,337 88.93

Combined Top 100 $ 207,816,282 99.40 $ 212,689,621 99.08

Total U.S. A&H Lines $ 209,076,912 $ 214,670,765

Source: S&P Global
Annual Report on the Insurance Industry (September 2022)

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FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

12

The data presented in Figure 2 and Figure 3 for life and annuity business, and in the comparable 

figures for other lines of business, are aggregated at a group level from filings made with state 

insurance regulators by individual legal entity insurers. For example, premiums shown for 

MetLife Inc. include premiums written and reported by all of its insurance subsidiaries in the 

United States but exclude business written by affiliated entities in non-U.S. jurisdictions.

Figure 2 shows that the aggregate market shares of the top 10 and top 25 life insurers declined 

slightly in 2021, while market share for the top 100 companies was little changed compared to 

2020. The increased business for Athene (no. 6) and Nationwide (no. 9) placed them in the top 

10 life insurers for 2021, while Lincoln Financial and Transamerica (which had been numbers 7 

and 9, respectively, for 2020) fell out of the top 10.

Figure 3 shows A&H premiums written by insurers authorized to offer both life and health 

insurance; it excludes A&H premiums written by insurers authorized to offer only health 

insurance. Therefore, for example, the data presented in Figure 3 for UnitedHealth Group do not 

reflect that insurer’s total health insurance premiums on a consolidated basis, but only premiums 

written by its subsidiaries licensed to offer both life and health insurance. There was little 

change among the top 10 writers of A&H lines of business in 2021 as compared to 2020.

As noted above, P&C insurers underwrite a variety of products, generally categorized as either 

personal lines or commercial lines. Figure 4 reports market share information on a combined 

P&C sector basis, while Figures 5 and 6 break the P&C sector into personal and commercial 

lines of business, respectively. On this combined basis, there was little year-over-year change in 

the composition of the top 10 companies, nor in the aggregate market shares of the top 10, 25, 

and 100 P&C companies. For personal lines of P&C business, Allstate dropped to fourth-largest, 

passed by both Progressive and Berkshire Hathaway, each of which moved up one spot in the 

rankings to second and third, respectively. Progressive also increased its standing in commercial 

lines, by moving into ninth place, while Tokio Marine fell out of the top 10.

Figure 4: P&C Insurance Groups by 2021 U.S. Combined Lines Direct Premiums Written

2020

Rank

2021

Rank Insurance Group

2020 Direct 

Premiums Written 

($000)

Share of 

Total (%)

2021 Direct 

Premiums 

Written ($000)

Share of 

Total (%)

1 1 State Farm $ 66,153,063 9.08 $ 70,311,695 8.81

2 2 Berkshire Hathaway Inc. 46,358,896 6.36 51,603,818 6.47

3 3 Progressive 42,275,572 5.80 48,373,113 6.06

5 4 Liberty Mutual 38,389,381 5.27 41,473,558 5.20

4 5 Allstate Corp. 39,546,131 5.43 41,387,729 5.19

6 6 Travelers 28,786,741 3.95 30,920,023 3.88

8 7 Chubb 24,199,582 3.32 27,122,466 3.40

7 8 USAA 24,625,924 3.38 25,257,974 3.17

9 9 Farmers Insurance 23,691,794 3.25 25,009,069 3.14

10 10 Nationwide 18,499,967 2.54 19,435,641 2.44

Combined Top 10 $ 352,527,051 48.36 $ 380,895,086 47.76

Combined Top 25 $ 488,898,127 67.07 $ 533,431,064 66.87

Combined Top 100 $ 640,713,211 87.89 $ 701,561,689 87.96

Total U.S. P&C Sector $ 728,958,745 $ 797,647,233 

Source: S&P Global (includes all lines of business)
Annual Report on the Insurance Industry (September 2022)

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FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

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Figure 5: P&C Insurance Groups by 2021 U.S. Personal Lines Direct Premiums Written

2020

Rank

2021

Rank Insurance Group

2020 Direct 

Premiums Written 

($000)

Share of 

Total (%)

2021 Direct 

Premiums 

Written ($000)

Share of 

Total (%)

1 1 State Farm $ 60,414,340 16.53 $ 64,036,546 16.58

3 2 Progressive 35,069,166 9.60 38,070,109 9.85

4 3 Berkshire Hathaway Inc. 34,279,410 9.38 37,862,570 9.80

2 4 Allstate Corp 36,021,515 9.86 37,752,864 9.77

5 5 USAA 23,140,418 6.33 23,727,194 6.14

6 6 Liberty Mutual 20,206,470 5.53 21,897,935 5.67

7 7 Farmers Insurance 19,351,388 5.30 20,049,218 5.19

8 8 Travelers 9,971,116 2.73 11,103,681 2.87

9 9 American Family Insurance 9,754,535 2.67 10,648,819 2.76

10 10 Nationwide 9,676,114 2.65 9,654,422 2.50

Combined Top 10 $ 257,884,472 70.58 $ 274,803,358 71.13

Combined Top 25 $ 303,981,655 83.20 $ 322,260,314 83.40

Combined Top 100 $ 348,550,028 95.39 $ 370,003,953 95.78

Total U.S. P&C Sector $ 365,382,996 $ 386,303,288 

Source: S&P Global

Figure 6: P&C Insurance Groups by 2021 Commercial Lines Direct Premiums Written

2020 

Rank

2021 

Rank Insurance Group

2020 Direct 

Premiums Written 

($000)

Share of 

Total 

(%)

2021 Direct 

Premiums 

Written ($000)

Share of 

Total 

(%)

1 1 Chubb $ 19,399,859 5.44 $ 22,323,908 5.53

2 2 Travelers 18,815,626 5.28 19,816,342 4.91

3 3 Liberty Mutual 18,043,293 5.06 19,473,757 4.82

4 4 Zurich 13,358,067 3.75 14,676,588 3.63

5 5 AIG 11,887,670 3.33 13,221,381 3.27

6 6 Berkshire Hathaway Inc. 11,601,352 3.25 13,198,188 3.27

7 7 CNA 11,302,724 3.17 12,161,672 3.01

8 8 The Hartford 9,575,425 2.69 10,761,401 2.66

12 9 Progressive 7,185,173 2.02 10,282,191 2.55

9 10 Nationwide 8,812,305 2.47 9,763,153 2.42

Combined Top 10 $ 130,555,129 36.62 $ 145,678,581 36.07

Combined Top 25 $ 215,660,269 60.49 $ 245,063,395 60.68

Combined Top 100 $ 310,573,774 87.11 $ 352,646,320 87.31

Total U.S. P&C Sector $ 356,526,711 $ 403,945,657 

Source: S&P Global

As shown in Figure 7 below, the aggregate market share of the top 10 writers in the Health sector

continued to tighten somewhat at the top, with the aggregate market share of the top 10 writers 

increasing slightly by nearly one percentage points (to almost 62 percent) from the 2020 mark. 

There were only minor changes in the rankings of the top 10 writers of health insurance for 2021.
Annual Report on the Insurance Industry (September 2022)

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FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

14 

Figure 7: Health Insurance Groups by 2021 Direct Premiums Written

2020 

Rank

2021 

Rank Insurance Group

2020 Direct 

Premiums Written 

($000)

Share of 

Total (%)

2021 Direct 

Premiums 

Written ($000)

Share of 

Total (%)

1 1 UnitedHealth Group $ 119,755,932 14.35 $ 138,000,410 15.16

2 2 Elevance Health Inc. 83,901,223 10.05 92,253,208 10.13

4 3 Centene Corp. 73,580,110 8.82 81,401,118 8.94

3 4 Humana Inc. 74,178,364 8.89 79,042,258 8.68

5 5 HCSC 44,520,575 5.34 46,267,933 5.08

6 6 CVS Health Corp. 29,365,207 3.52 31,937,687 3.51

7 7 GuideWell 22,641,879 2.71 24,606,232 2.70

10 8 Molina Healthcare Inc. 19,106,224 2.29 24,098,384 2.65

9 9 Independence Health 

Group Inc. 20,105,855 2.41 22,969,351 2.52

8 10 Kaiser Permanente 20,955,411 2.51 20,821,188 2.29

Combined Top 10 $ 508,110,781 60.89 $ 561,397,768 61.66

Combined Top 25 $ 656,658,616 78.69 $ 717,182,803 78.77

Combined Top 100 $ 812,101,990 97.32 $ 885,268,566 97.23

Total U.S. Health Sector $ 834,462,221 $ 910,477,946

Source: S&P Global

Life and Health Sector

Financial Performance

This section presents additional analysis of the financial performance of the L&H sector in 2021, 

and then assesses the L&H sector’s overall financial condition as of December 31, 2021. 

i. Net Premiums Written

Direct premiums written is a principal measure of the sales activity and growth of an insurer. 

Net premiums written, the sum of direct premiums written and net ceded reinsurance premiums, 

is a measure of the amount of risk retained by an insurer. Figure 8 shows net premiums written, 

considerations, and deposits over the past five years for the L&H sector, while Figure 9 shows 

the 2021 composition of net premiums and considerations. In 2021, the record $819 billion of 

direct premiums written for the L&H sector constituted growth of nearly seven percent over 

2020, marking the strongest increase over the past 10 years. This high growth in direct 

premiums written was partly caused by a resurging interest in life insurance resulting from 

increases in mortality and morbidity from the COVID-19 pandemic.47 Sales gains in ordinary 

life insurance (up 11 percent) and ordinary individual annuities (up 15 percent, aided by 

47 Michael Lynch, U.S. Life/Annuity Insurers’ Revenue Rebounded in 2021 (April 8, 2022), 1, 

https://news.ambest.com/research/DisplayBinary.aspx?TY=P&record_code=318961&URatingId=2562038&AltSrc

=108&_ga=2.58575146.104803370.1661035661-235444461.1646407991. 
Annual Report on the Insurance Industry (September 2022)

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FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

15 

continued demand for retirement savings solutions) were particularly strong.48 Product 

innovation by issuers of individual annuities also bolstered this strong top line performance.49 

FIO’s analysis shows that, when taking into account the amount of premiums ceded to reinsurers, 

L&H sector net premiums written were $638 billion in 2021, marking a two percent increase 

from the $626 billion reported in 2020. Net ceded reinsurance increased by 28 percent in 2021 

to $183 billion, the highest level in the last 10 years. Insurers also sought to lay off their 

exposure to interest rates through transfers of legacy books of interest-sensitive fixed rate 

annuities and variable annuity blocks.50 Much of the ceded business was assumed by private 

equity-linked reinsurers, the presence of which has been growing notably over the past few years 

(see Box 2: Increased Focus on Private Equity in the Life Insurance Sector).51

Net premiums written have contributed on average 71 percent of total L&H sector revenues over 

the past 10 years but decreased to 67 percent of revenues in 2021, down from 72 percent in 2020. 

Strong gains in net investment income and a large positive swing in the reinsurance allowance 

boosted total sector revenue growth well in excess of the growth in net premiums written. 

Annuity premiums and deposits decreased by three percent, while life insurance premiums 

increased by 11 percent, and A&H premiums increased two percent as compared to 2020. For 

2021, annuity premiums and deposits constituted 45 percent of total net premiums written, as 

shown in Figure 9. Sales of traditional life insurance products accounted for 25 percent of 2021 

L&H sector net premiums written, while the remaining 30 percent was comprised almost entirely 

of A&H sector premiums.

48 Tim Zawacki, “Historic 2021 U.S. Individual Life, Annuity Premium Growth a Tough Act to Follow,” S&P 

Global Market Intelligence, March 14, 2022, https://www.spglobal.com/marketintelligence/en/newsinsights/research/historic-2021-us-individual-life-annuity-premium-growth-a-tough-act-to-follow. 

49 Lynch, U.S. Life/Annuity Insurers’ Revenue Rebounded in 2021, 2.

50 Michael Porcelli, U.S. Life/Annuity: Record Capitalization, Strong Liquidity, and Improved Earnings in 2021

(March 10, 2022), 10, 

https://news.ambest.com/research/DisplayBinary.aspx?TY=P&record_code=318212&URatingId=2562038&AltSrc

=22&_ga=2.234163742.104803370.1661035661-235444461.1646407991. 

51 Tim Zawacki, “Large Deals Elevate Private Equity-Linked Reinsurers in U.S. Life, Annuity Market,” S&P Global 

Market Intelligence, April 26, 2022, 1, https://www.spglobal.com/marketintelligence/en/newsinsights/research/large-deals-elevate-private-equity-linked-reinsurers-in-us-life-annuity-market. 
Annual Report on the Insurance Industry (September 2022)

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FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

16

Figure 8: L&H Sector Net Premiums, Considerations, and Deposits

Source: S&P Global

Figure 9: 2021 Composition of Net Premiums and Annuity Considerations

for the L&H Sector

Source: S&P Global

ii. Policyholder Contract Benefits, Surrenders, and Other Expenses

Policyholder contract benefits are claims or obligations of L&H insurers under life insurance, 

annuity, and other contracts and policies. Contract surrenders occur when a policyholder or 

$0

$50

$100

$150

$200

$250

$300

$350

$400

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Net Premiums Written

($ billions)

Year

 Life Insurance Premiums Annuity Premiums & Deposits

 Accident & Health Premiums

Individual Life

20%

Group Life

4%

Individual Annuities

23% Group Annuities

22%

Accident and Health

30%

Other 

1%
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contract holder elects to cancel a policy or contract before the end of the contractual term and 

thus receives its accumulated cash value (if any). Contract benefit payments and contract 

surrenders comprise the majority of total expenses for L&H insurers in any given year. Nonbenefit related expenses include general administrative and overhead expenses, expenses 

incurred in acquiring business (particularly producer commissions), and expenses related to 

payments made under contractual provisions of policies, including loss verification and 

adjustment expenses. Figure 10 shows aggregate L&H sector benefit payments, surrenders, 

reserve increases, and all other expenses for recent years.

Figure 10: L&H Sector Expenses ($ thousands)

2017 2018 2019 2020 2021

Total Benefits Payments $281,360,939 $289,480,982 $301,813,113 $314,168,409 $338,416,624

Total Surrenders 308,928,842 350,278,913 339,640,132 323,350,563 362,681,903

Total Reserve Increases 106,352,393 143,299,884 120,573,957 109,836,567 89,754,962

Total Net Trsfrs. to Sep. 

Accts (65,770,433) (89,648,289) (71,995,355) (69,212,368) (75,602,806)

Commissions 58,001,783 58,336,146 61,198,400 60,087,967 64,523,499

General & Admin 

Expenses 65,850,564 65,887,312 67,822,122 67,020,241 69,360,126

Insurance Taxes, Licenses 

and Fees 8,814,167 10,746,370 9,298,006 11,509,597 10,059,613

Other Expenses (4,129,166) 11,349,411 14,420,556 8,386,678 14,802,279

Total $759,409,089 $839,730,729 $842,770,930 $825,147,654 $873,996,200

Source: S&P Global

Total L&H sector expenses increased by six percent in 2021. Expenses attributable to total 

contract surrenders increased 12 percent and those attributable to total benefits payments grew 

by eight percent. An 18 percent decline in additions to reserves somewhat offset those increases. 

Surrenders of annuities and other variable return insurance products tend to increase when 

account values rise, as consumers seek to cash in on gains and to reduce market risk. The 2021 

increase in benefits payments was largely due to increased mortality from the COVID-19 

pandemic among the working age population.52 A nine percent increase in net transfers from 

separate accounts was also a significant favorable change in 2021 expenses.53

iii. Investment Income

Net investment income of $201 billion constituted about 21 percent of aggregate L&H sector 

revenues in 2021, representing a strong eight percent increase over 2020 that was bolstered by 

income from alternative investments. This was the first meaningful gain in net investment 

52 Lynch, U.S. Life/Annuity Insurers’ Revenue Rebounded in 2021, 3.

53 A separate account is a segregated set of financial statements held by a life insurance company, maintained to 

report assets and liabilities for specific products that are separated from the insurer’s general account. The product 

features of a separate account can vary but, generally, it allows an investor to choose an investment category 

according to risk tolerance and desire for performance. Separate account investments and related risks flow to the 

investor (i.e., the policyholder or annuitant) while the general account and its related risks are owned by the insurer.
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income since 2018, and the first ever crossing of the $200 billion mark. Figure 11 shows L&H 

sector net investment income from invested assets (excluding net realized gains and losses) and 

the net investment yield for recent years. The net yield on invested assets showed the first 

notable increase in over 10 years, rising to 4.21 percent from 4.13 percent in 2021 (see Figure 

11). The increase in net yield was primarily the result of the eight percent increase in net 

investment income, coupled with a slower, five percent increase in cash and invested assets.

Figure 11: L&H Sector Annual Net Investment Income and Net Yield on Invested Assets 

Source: S&P Global

Longer term interest rates rose significantly in the first quarter of 2021, largely attributable to 

inflation fears and supply chain issues, followed by a slight pullback in the second quarter of the 

year, and then remained relatively flat over the second half of 2021 (see Figure 12). Despite a 

significant increase from historically low levels as inflationary pressures began to emerge, the 

general interest rate environment remained at relatively low levels at the end of 2021.

$167 $167

$172 $171 $173

$182

$187 $187 $186

$201

3.5%

4.0%

4.5%

5.0%

$130

$140

$150

$160

$170

$180

$190

$200

$210

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Net Yield

(%)

Net Investment Income 

($ billions)

Net Investment Income (left axis) Net Yield on Invested Assets (right axis)
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Figure 12: Percentage Yield on 10-Year Treasury Bonds

Source: S&P Global

In 2021, the L&H sector net realized capital losses decreased to $8.3 billion (or 23 percent) from 

$10.8 billion in 2020 (see Figure 13). This followed a 45 percent increase in realized capital 

losses experienced in 2020 compared to 2019. The improvement in 2021 appears to be due to 

higher realized gains on fixed income securities, preferred and common stocks, and other 

invested assets, and lower losses on affiliated investments, all of which were slightly offset by 

losses on derivatives (almost exclusively used for hedging transactions). Generally, net realized 

capital losses have been lower for the past several years than their historic levels.54

iv. Net Income and Return on Equity

Figure 13 presents a summary income statement for the L&H sector. Total revenues in the L&H 

sector were $946 billion in 2021, an increase of seven percent from the $881 billion reported in 

2020. All revenue sources shown in Figure 13 contributed to the L&H sector’s overall gain in 

revenue in 2021. Total expenses increased by only six percent to $874 billion, leading to a 42 

percent increase in pre-tax operating income. Net income rose by 69 percent to $37 billion in 

2021, largely because of the $15 billion increase in the net gain from operations. 

54 Compare, for example, FIO, Annual Report on the Insurance Industry (2014), 

https://home.treasury.gov/system/files/311/2014_Annual_Report.pdf (showing historic data from 2013 and earlier 

years).

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

Dec-11

Jun-12

Dec-12

Jun-13

Dec-13

Jun-14

Dec-14

Jun-15

Dec-15

Jun-16

Dec-16

Jun-17

Dec-17

Jun-18

Dec-18

Jun-19

Dec-19

Jun-20

Dec-20

Jun-21

Dec-21

Percentage Yield

Month and Year
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Figure 13: L&H Sector Net Income ($ thousands)

2017 2018 2019 2020 2021

Net Premiums, Consideration & 

Deposits 597,051,057 603,190,697 679,437,300 625,709,268 637,827,596

Net Investment Income 182,257,219 187,381,415 186,650,144 185,980,542 200,805,489

Reinsurance Allowance (25,108,912) 32,044,503 (29,719,855) (22,835,847) 8,507,447

Separate Accounts Revenue 36,551,982 37,271,230 36,754,163 37,351,807 40,977,971

Other Income 49,163,993 44,037,925 48,749,163 54,986,005 57,532,991

Total Revenue 839,915,339 903,925,771 921,870,915 881,191,774 945,651,494

Total Expenses 759,409,089 839,730,729 842,770,930 825,147,654 873,996,200

Policyholder Dividends 17,498,496 18,192,333 18,111,045 18,027,639 17,784,403

Net Gain from Operations before FIT 63,004,352 46,000,675 60,988,940 38,016,481 53,870,891

Federal Income Tax 12,360,768 3,397,276 9,432,127 5,135,473 8,156,443

Net Income before Cap Gains 50,645,915 42,604,906 51,556,814 32,881,008 45,714,448

Net Realized Capital Gains (Losses) (8,554,343) (4,742,717) (6,860,853) (10,746,368) (8,283,318)

Net Income 42,094,584 37,865,073 44,695,961 22,134,640 37,431,129

Source: S&P Global

Figure 14 shows key operating ratios for the L&H sector. The L&H sector’s 2021 pre-tax 

operating margin increased to 5.7 percent from 4.3 percent in 2019. The strong increase in 

operating income, coupled with a slower increase in equity (discussed below), led to an increase

in the sector’s pre-tax operating return on average equity to 11.8 percent, compared to the 8.8 

percent recorded in 2020. The return on average equity rose to 8.2 percent in 2021 from 5.1 

percent in 2020. The return on average assets increased to 0.46 percent in 2021 from 0.29 

percent in 2020. While the 2021 operating performance demonstrated by these metrics was not 

close to record levels, it was substantially improved over the pandemic-impacted 2020 results 

and shows a trending toward more normalized results for the sector.
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Figure 14: L&H Sector Operating Ratios

Source: S&P Global

Financial Condition

This section presents information on the 2021 financial condition of the L&H sector, providing 

insight into the sector’s financial safety and soundness by highlighting certain financial 

indicators and trends in recent years and over the past decade from 2012 through 2021.

i. Capital and Surplus

Though the effects of the pandemic were ongoing in 2021, the L&H sector grew its capital 

position by eight percent from 2020, attaining a new 10-year high. As illustrated in Figure 15,

capital and surplus reached $475.9 billion in 2021, with positive growth in each of the last five 

years. A nearly nine percent year-over-year increase in separate account assets, further 

supported by annual growth of nearly five percent in cash and invested assets, primarily boosted

2021 capital levels.

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Percent

Year

Pre-Tax Operating Margin Return on Average Equity (Capital & Surplus)

Pre-Tax Operating Return on Average Equity Return on Average Assets
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Figure 15: L&H Capital and Surplus Position ($ thousands)

2017 2018 2019 2020 2021

Capital & Surplus $ 395,024,290 $ 399,896,318 $ 421,671,764 $ 440,488,741 $ 475,874,180

Year-Over-Year Growth 3.8% 1.2% 5.4% 4.5% 8.0%

General Account Assets $4,301,459,820 4,358,585,783 4,583,365,496 4,918,251,495 5,165,107,603

Year-Over-Year Growth 4.5% 1.3% 5.2% 7.3% 5.0%

Capital & Surplus to

General Account Assets 9.2% 9.2% 9.2% 9.0% 9.2% 

Separate Account Assets $2,710,115,519 2,459,770,566 2,794,571,563 3,041,751,129 3,299,168,900 

Source: S&P Global

Averaging 3.9 percent since 2012, annual growth in general account assets has remained positive 

over the last decade for the L&H sector. The stability in the ratio of capital and surplus to 

general account assets over the last 10 years, which ranged from 9.0 percent to 9.4 percent, 

suggests that the L&H sector has been consistently managing its general account excess capital 

to meet policyholder commitments and other financial obligations.

The L&H sector issued surplus notes of $47.8 billion in 2021, increasing by 11.7 percent from 

the prior year and marking a ten-year peak. The significant issuance can likely be attributed in 

part to the credit relief measures that were provided during the pandemic, allowing market 

participants to secure more favorable long-term financing rates. The last five years have seen 

positive annual growth in surplus notes or debt capital, growing by 10.5 percent on average since 

2017.55 By contrast, growth of organic or non-debt capital has only averaged 4.0 percent over 

the same five-year period. Surplus notes accounted for 10 percent of aggregate capital and 

surplus at year-end 2021, the highest share in the last decade and up from 9.7 percent at year-end

2020. Because of their relative share of capital and surplus, surplus notes do not substantially 

change the pro forma growth of capital and surplus with their removal, suggesting that the L&H 

sector in the aggregate is able to generate capital from its core operations without reliance on 

external capital. 

Year-over-year positive earnings—i.e., consistent gains generated from the sector’s underwriting 

operations before factoring in capital gains and losses—have steadily driven capital 

accumulation for the L&H sector over the last decade. Annual revenue growth of more than 

seven percent largely resulted in the sector’s strong underwriting performance in 2021, with net 

income (before capital gains) contributing 10.4 percent to the growth of capital and surplus from 

the previous year end. As market volatility and pandemic uncertainty subsided in 2021, the 

L&H sector reported an increase in net unrealized capital gains of $22.2 billion, largely 

attributable to gains from alternative investments, and a decrease in net realized capital losses of 

$8.3 billion. Both components combined to further enhance the sector’s capital position by 3.2 

percent.

As would be expected, stockholder dividends have partially offset the growth in capital and 

surplus. In 2021, stockholder dividends were $33.6 billion compared to $26.6 billion in 2020 

55 Though treated as equity under state insurance regulations, surplus notes are debt-like instruments that are subordinated 

to policyholder obligations and other current and future borrowings.
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and a 10-year high of $38 billion in 2018. To ensure that insurers’ assets adequately protect 

policyholders, all stockholder dividends are subject to review by state insurance regulators and, 

in the case of extraordinary dividends, insurers must seek regulatory approval prior to 

distribution. Overall, stockholder dividends have reduced capital and surplus by 7.6 percent on 

average annually since 2012. By contrast, net income before capital gains and losses have

increased capital and surplus by 12.6 percent on average over the same period. Figure 16 

presents the key determining factors of capital and surplus for the L&H sector in the last 10 years

through 2021.

Figure 16: Leading Determinants of Capital and Surplus for the L&H Sector

Source: S&P Global

Figure 17 shows that the average risk-based capital (RBC) ratio for the L&H sector improved in 

2021. Specifically, statutory capital and surplus in 2021 for the L&H sector was 4.42 times the 

level of minimum required regulatory capital on average, compared to 4.26 times the required 

level in 2020.

-15%

-10%

-5%

0%

5%

10%

15%

20%

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Percemtage Contribution to

Prior Year-End 

Capital and Surplus

Year

Net Income excl. Capital Gains Net Realized Capital Gains (Losses)

Net Unrealized Capital Gains (Losses) Dividends to Stockholders
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Figure 17: Average Risk-Based Capital Ratios for the L&H Sector

Note: RBC ratios for 2019 and 2020 calculated from S&P Global data.

Source: ACLI Fact Book, S&P Global

In 2021, the NAIC and state regulators adjusted the RBC formulas for the life/fraternal, 

property/casualty, and the health insurance business models, implementing the approved changes 

for 2021 year-end reporting.56 The NAIC also developed new bond factors for all the RBC 

formulas. For the life insurance RBC formula, the NAIC adopted changes that help determine 

how much capital a life insurer must hold against its bond portfolios. By broadening the number 

of bond designation categories from 6 to 20, the NAIC introduced more granular risk charges for 

bonds in the life insurance RBC formula.

57 The NAIC bond designations are based on nationally 

recognized statistical ratings organization ratings as well as those assigned by the NAIC’s 

Securities Valuation Office. Under the former methodology, an A-rated bond would be 

categorized as NAIC 1 and receive the same capital treatment as a AAA-rated bond. Under the 

new methodology, investment grade bonds are largely subject to more punitive RBC charges, 

particularly at the lower end of the credit quality spectrum within each ratings category. On the 

other hand, in a few select ratings categories, capital efficiency has improved—specifically, at 

the upper end of each ratings category, i.e., AAA, AA+, BB+, B+, etc.—better reflecting the 

lower risk of these bond holdings. Additionally, the differences in the RBC factors between 

investment-grade and below investment grade have narrowed noticeably under the new 

56 See “Capital Adequacy (E) Task Force-Adopted Risk-Based Capital Formulas,” NAIC, 

https://content.naic.org//capital_adequacy_task_force.htm. 

57 Early in 2020, the NAIC expanded the number of bond designation categories to 20, replacing the previous six 

categories, with the same format adopted for each of the RBC formulas. Although the reporting format changed, 

there were no new factors for 2020. Anurag John & Raghu Ramachandran, Potential Impacts of Risk-Based Capital 

Factors (July 2021), https://www.spglobal.com/spdji/en/documents/commentary/market-commentary-potentialimpacts-of-proposed-risk-based-capital-factors.pdf. 

466 481 489 486 480 470

424 431 426 442

100

150

200

250

300

350

400

450

500

550

600

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Percent

Year
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25 

methodology. These changes do help bring increased granularity to the NAIC’s RBC formulas; 

however, the new RBC methodology is based on corporate default term structures, so it is 

unclear whether the increased granularity fully captures the risks of life insurers’ bond 

portfolios.58 As discussed later in this Report (see Section II.A.2b on “Changing Investment 

Allocations”), the composition of insurers’ bond holdings increasingly includes greater 

percentages of asset-backed securities that have different risk profiles from that of corporate 

bonds, yet still receive the same RBC treatment.

In addition to new bond factors, other key changes in the life RBC formula included revised real 

estate factors and new longevity risk factors.59

Leverage represents the degree to which an insurer’s surplus is exposed to risks from 

underwriting and investment activities and presents another indicator of surplus strength. The 

trends observed in certain leverage ratios can be indicative of an insurer’s ability to successfully 

navigate through market pressures. The greater financial flexibility illustrated by steady (or 

declining) leverage ratios, for example, can better enable insurers to fulfill policyholder 

obligations by: (1) returning a profit by investing the premiums received from underwriting 

activities; and (2) limiting the risk exposure from the policies underwritten. Insurers also employ 

reinsurance to move some of the risks off their own balance sheets and on to those of reinsurers 

(thereby improving, i.e., decreasing leverage). Figure 18 provides a view of the L&H sector’s 

general account leverage for the last 10 years.

58 FIO encouraged continued improvement of the NAIC’s Securities Valuation Office in an analysis of privateequity issues. See Letter from Jonathan C. Davidson, U.S. Department of the Treasury Assistant Secretary for 

Legislative Affairs, to Senator Sherrod Brown (June 29, 2022), 4, 7, 

https://www.banking.senate.gov/imo/media/doc/fio_85.pdf. For more on private equity, see Box 2. 

59 See NAIC Capital Adequacy Task Force, “RBC Proposal Form,” https://content.naic.org/sites/default/files/inlinefiles/2021-06-L%20RBC%20Proposal.pdf, https://content.naic.org/sites/default/files/inline-files/2021-13-L.pdf.
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Figure 18: L&H Sector Leverage Ratios

Source: S&P Global

All three leverage metrics decreased slightly in 2021. The growth in capital and surplus in 2021 

largely offset the pace of growth in the other components captured in the ratios, improving the 

L&H sector’s financial capacity.

The net leverage ratio was 11.2 in 2021, down from 11.59 in 2020, suggesting that the L&H 

sector’s ability to absorb losses from claims and estimated future liabilities remains sound.60 

After a substantial decrease in 2020 in net premiums, annuities, and considerations (collectively 

referred to as net premiums in the net leverage ratio), the L&H sector returned to positive 

premium growth in 2021 as economic conditions gradually improved from the effects of the 

COVID-19 pandemic. Net premiums were $637.8 billion in 2021 compared to $625.7 billion in 

2020. 

Reflected in the net leverage ratio is the historical expansion of direct premiums and 

considerations in 2021, exhibiting an annual growth rate of approximately seven percent. 

Healthy balance sheets and pent-up consumer demand in 2021 largely underpinned year-overyear growth in the ordinary life insurance business, reaching 10.7 percent and the highest rate in 

25 years. Likewise, annual growth of 14.9 percent in ordinary individual annuity direct 

premiums and considerations in 2021 was the highest rate in 19 years.61 Rising interest rates 

may further enhance growth in annuity business. Along with premium growth, increased general 

60 Net leverage ratio is an indicator of the sector’s exposure to pricing and estimation errors, determined by 

calculating total liabilities and net premiums, annuities, and considerations as a multiple of capital and surplus.

61 Tim Zawacki, “Historic 2021 U.S. Individual Life, Annuity Premium Growth a Tough Act to Follow,” S&P 

Global Market Intelligence, March 22, 2022, www.spglobal.com/marketintelligence/en/newsinsights/research/historic-2021-us-individual-life-annuity-premium-growth-a-tough-act-to-follow. 

6.0

6.6

7.2

7.8

8.4

9.0

9.6

10.2

10.8

11.4

12.0

12.6

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Multiple of Capital and Surplus

Year

Net Leverage (net premium written and liabilities)

Asset Leverage

Total Reserves & Deposits
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account liabilities further raised the numerator of the net leverage ratio, but the combined impact 

was offset by growth in capital and surplus in 2021.

The net leverage ratio also considers the sector’s reinsurance activity. The share of gross 

premiums ceded to reinsurers rose in 2021, resulting in a reduced net retention rate of 63.2

percent from 67.9 percent in 2020. Cessions accounted for nearly 37 percent of gross premiums 

at year-end 2021, rising from 32.1 percent at year-end 2020. Additionally, life premiums that 

were ceded to Bermuda grew to $109.5 billion in 2021 (up from $84.4 billion in 2020). These 

amounts accounted for over 72 percent of all life cessions to non-U.S. reinsurers in each of those 

two years. Surplus relief levels have steadily risen over the last decade, as the average annual 

growth rate of reinsurance cessions has sharply exceeded that of net premiums in nearly every 

year over the last decade. Surplus relief during this period more than doubled, increasing from 

$12.9 billion in 2012 to $26.8 billion in 2021, making up 4.8 percent of capital and surplus on 

average each year. In the last five years, in particular, the surplus relief ratio averaged more than

5.4 percent annually.62

Turning to total policy reserves and deposit-type contract reserves, year-over-year growth has 

averaged almost three percent since 2012. The impact of interest rates and high COVID-19 

mortality levels in 2021 did not appear to noticeably affect total policy reserves and deposit-type 

contract reserves, which totaled $3.7 trillion and $3.6 trillion for the years ending 2021 and 2020, 

respectively. The multiple of policy reserves and deposits to capital and surplus was 7.9 at yearend 2021, the lowest figure in a decade. For most of the last 10 years, the ratio has ranged 

between 8.2 and 8.4, suggesting that the financial resources set aside by the sector have largely 

been in line with expected claims commitments.

The asset leverage ratio aims to measure the potential impact on the balance sheet arising from 

the volatility and credit quality of the sector’s investment portfolio, reinsurance recoverables, and 

agents’ balances. The ratio is calculated as the sum of cash and invested assets plus reinsurance 

recoverables and agents’ balances to capital and surplus. In the past decade, the L&H sector’s 

asset leverage ratio has ranged between a low of 10.26 at year-end 2015 and a high of 10.80 at 

year-end 2020. While the asset leverage ratio decreased slightly to 10.50 in 2021, life insurers 

have increasingly sought greater yield during the prolonged low interest environment, which 

indicates that the sector’s surplus may be increasingly supported by riskier assets. In addition to 

their significant presence in the corporate bond market, life insurers have also increased their 

participation in the private markets, in large part due to sustained low interest rates. As a result, 

portions of their investment portfolios have shifted away from traditional holdings in favor of 

higher yielding but less liquid investments, thereby potentially increasing insurers’ exposure to 

risks stemming from sharp drops in asset prices, elevated issuer leverage, rising defaults, and 

funding risks. As Figure 19 below shows, alternative investment holdings have doubled since 

62 The use of reinsurance for surplus relief is most common when an insurer begins to rapidly expand its volume of 

premiums written. “Surplus relief” refers to the amount of surplus not yet reported as income from commissions 

and expense allowances on reinsurance ceded during the current year. It captures the amounts related to A&H 

business as well as life and annuity business for general and separate accounts.
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28 

2012 and comprise an increasing share of L&H insurers’ investment portfolios, totaling $285.5 

billion at year-end 2021. (See also Box 2.) 

Figure 19: Growth of Alternative Investments Held by L&H Sector

Source: S&P Global

i. Assets

Year-over-year expansion of capital and surplus can be attributable to consistent growth in the 

L&H sector’s investment portfolio and strong growth in separate accounts. General account 

assets rose to $5.2 trillion in 2021 from $4.9 trillion in 2020, resulting in an average annual 

growth rate of 3.9 percent over the last decade. Except for 2018, annual growth of separate 

account assets has generally been healthy, averaging over 10 percent in each of the last three 

years alone. Total L&H sector assets, including separate accounts, were $8.5 trillion and $8.0 

trillion for the years ending 2021 and 2020, respectively. 

Figure 20 shows the composition of the L&H sector’s asset portfolio and distribution of cash and 

investments in the last five years. Of total asset holdings, general account assets have averaged 

over 62 percent of the portfolio on a yearly basis since 2017, while separate account assets have 

averaged 38 percent.

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

 $-

 $50

 $100

 $150

 $200

 $250

 $300

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Year

Alternative Investments Share of Cash and Investments

Alternative Investments

as reported on Schedule BA 

($ billions)

Share of Cash and Investments 
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Figure 20: Composition of L&H Sector 

General Account Assets and Investment Portfolio

2017 2018 2019 2020 2021

General Account Assets / Total Assets 61.3% 63.9% 62.1% 61.8% 61.0%

Separate Account Assets / Total Assets 38.7% 36.1% 37.9% 38.2% 39.0%

Bonds (long-term) 73.0% 72.5% 71.1% 70.2% 69.9%

Preferred Stocks 0.3% 0.3% 0.3% 0.3% 0.4%

Common Stocks 2.3% 2.0% 2.1% 2.2% 2.3%

Mortgage Loans 11.7% 12.6% 13.0% 12.6% 12.8%

Real Estate 0.6% 0.5% 0.5% 0.5% 0.5%

Contract Loans 3.2% 3.1% 3.0% 2.8% 2.6%

Derivatives 1.4% 1.4% 1.8% 2.6% 2.0%

Cash & Short-Term Investments 2.6% 2.5% 2.7% 3.2% 2.9%

Other Investments 5.0% 5.1% 5.3% 5.5% 6.6%

Total Cash & Investments 100.0% 100.0% 100.0% 100.0% 100.0%

Share of General Account Assets 94.7% 94.6% 94.7% 94.7% 94.6%

Source: S&P Global

As detailed in Figure 20, the structure of the sector’s investment portfolio has remained generally 

constant over the last five years, though some recent shifts can be observed. Cash and invested 

assets of $4.9 trillion continued to make up nearly 95 percent of the general account asset 

portfolio at year-end 2021, which is in line with the investment composition during the first half 

of the past ten-year period. Bond holdings have consistently made up the bulk of the L&H 

sector’s investment portfolio, reflective of the significant role that life insurers play in the 

corporate bond market for their asset-liability matching strategy. The predictability of cash 

flows from bond investments enhances insurers’ ability to meet future policyholder obligations, 

making such investments a key feature of the sector’s business model. Of total bonds held by 

life insurers, close to 97 percent have consistently been long-term in nature—in line with the 

long-term nature of obligations assumed under life policies and contracts. This concentration of 

long-term assets with predictable (nominal) returns is indicative of insurer risk management 

practices that match asset and liability durations, aimed at mitigating the impact of interest rate 

fluctuations on capital and surplus and providing insurers with the ability to estimate cash flows 

to meet both debt and policyholder obligations as they become due. 

An ongoing trend for the L&H sector, however, has been the gradual migration away from longterm bond holdings to mortgage loans, driven by the sector’s desire for higher yields and risk 

diversification. The L&H sector has progressively reduced its long-term bond exposure, while 

expanding its mortgage loan investments. Long-term bond holdings have declined by nearly five 

percentage points, falling from a high of 74.7 percent of the L&H investment portfolio in 2012, 

while mortgage loans have increased by three percentage points over that same period. Housingrelated mortgage loan acquisitions by life insurers rose by 92 percent in 2021, surpassing growth 

in other property types.63 Mortgage loans have remained the second largest investment class 

63 Tim Zawacki, “Less-Liquid Assets Play Bigger Role in US Life Insurers’ Search for Yield,” S&P Global Market 

Intelligence, May 10, 2022, https://www.spglobal.com/marketintelligence/en/news-insights/research/less-liquidassets-play-bigger-role-in-us-life-insurers-search-for-yield. 
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held by the L&H sector, averaging over 11.5 percent of cash and invested assets annually during 

the past decade. Unwavering year-over-year growth has led to total mortgage loans of $625.9

billion in 2021, rising from $587.2 billion in 2020 and achieving a peak for the decade.

Commercial mortgage loans have made up the bulk of the sector’s exposure to mortgage loans. 

Life insurers increased mortgage loan purchases in retail and lodging property types in 2021, 

after mortgage activity had been depressed during the height of the COVID-19 pandemic in 

2020. The L&H sector’s activity in the office property market has not yet recovered to the same 

levels as retail and hotel property investments. As businesses have adapted to the COVID-19 

pandemic by employing greater flexibility in work arrangements, the valuations of such 

commercial properties have declined, raising loan-to-value ratios and reducing debt service 

coverage.

Finally, other investments in Figure 20, which include alternative investments reported on 

Schedule BA of statutory financial statements have shown a steady year-over-year increase, 

illustrating in part the impact of the protracted low interest rate environment on life insurers’ 

investment portfolios and the reach for yield.

ii. Liquidity

Uncertainty related to ongoing pandemic effects may have caused some of the developments in 

the L&H sector’s liquidity position in 2021. Certain metrics are indicative of stable liquidity 

positions. Positive net cash flows from operations continued and the current liquidity ratio

remained constant.

64 At the same time, adverse trends could be seen in surrender activity and 

benefit payments, as well as in changes in investment behavior that accepted potential increased 

liquidity risk to obtain higher yields. Figure 21 illustrates the cash flows from L&H sector 

operations, showing surrenders and benefit payments, each as a share of net premiums collected.

64 This liquidity analysis is based on cash inflows and outflows from operations, as reflected in the cash flow 

statement, and specifically refers to premiums that were collected and benefit and loss-related payments actually 

made during the year. By contrast, the income statement shows profitability for the year, reflecting the revenues and 

gains as well as the expenses and losses incurred during the reporting period. Timing differences differentiate the 

cash flow and income statements.
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Cash Flow

Figure 21: Cash Flows from Operations for the L&H Sector

Source: S&P Global

While premiums collected net of reinsurance remained relatively flat in 2021, benefit payments 

and surrender activity each exhibited material changes.

65 Specifically, benefit payments totaled 

$736.4 billion, an almost 13 percent year-over-year increase from 2020, and reached a decade 

high in 2021 in terms of both volume and share of premium receipts, as the impact of COVID-19 

pushed mortality above the elevated levels witnessed in 2020. While the Omicron variant became 

dominant during the fourth quarter of 2021 and generally caused less severe cases of COVID-19, many 

U.S. life insurers reported considerably higher mortality levels than those experienced in 2020.66 

Similar to benefit payments, surrender activity (in terms of volume) escalated and reached a 

decade high point in 2021. After surrender levels declined in 2020 and 2019, surrenders rose by 

12.2 percent to $362.7 billion in 2021. As Figure 21 demonstrates, there is a noticeable 

difference in surrender activity in the first half of the past ten-year period compared to the second 

half. Surrenders comprised 43.4 percent of net premium receipts on average each year from 

2012 through 2016 compared to 52.0 percent annually from 2017 through 2021. Year-over-year 

growth in surrenders has been averaging 4.6 percent, while the annual growth rate for net 

65 Premiums collected net of reinsurance is the largest component of cash inflows from operations. Other cash 

receipts stem from net investment income and miscellaneous income.

66 Hailey Ross & Jason Woleben, “US Death-Benefit Payouts Hit Record High in 2021,” S&P Global Market 

Intelligence, March 15, 2022, https://www.spglobal.com/marketintelligence/en/news-insights/latest-newsheadlines/us-death-benefit-payouts-hit-record-high-in-2021-69102708. 

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

110%

120%

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

As a Share of Net Premium Collected

Year

Surrenders Benefit Payments
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premium receipts has been averaging 0.9 percent over the same ten-year period. Net premium 

receipts were $663.9 billion and $664.6 billion in 2021 and 2020, respectively. 

With regard to the individual annuity category, surrender benefits and withdrawals for variable 

annuities with guarantees increased the sharpest in 2021, escalating by 23 percent to $122.6 

billion in 2021. Surrenders for fixed deferred annuities and indexed annuities rose to $31.1 

billion and $30.9 billion, respectively, with each exhibiting a more than 13 percent increase from 

2020. Variable annuities without guarantees had an almost 17 percent increase in surrenders.67

One likely potential cause of the heightened surrender activity observed in 2021 is related to 

expectations of higher interest rates. As the COVID-19 pandemic environment improved and 

more businesses were able to reopen in 2021, the pace in the demand for goods and services in 

the economy began to overtake available supply, causing inflation concerns. For some insurance 

products like variable annuities, inflationary risk and equity market valuations tend to have 

considerable influence on policyholder behavior. Additionally, surrender activity may reflect the 

effects of reinsurance transactions, recaptures, and strategic decisions relative to in-force blocks 

of business, resulting in differing impacts across individual firms. 

Positive cash flows from operations have been constant over the past decade, contributing to 

steady growth in cash and invested assets and bolstering liquidity for the L&H sector. At yearend 2021, cash and total invested assets were $4.9 trillion, increasing by nearly 5 percent from 

the prior year-end and tracking the 4.8 percent year-over-year growth in general account 

liabilities that totaled $4.7 trillion in 2021. Furthermore, the ratio of cash and invested assets to 

general account liabilities has remained stable over the past decade, averaging slightly above a 

multiple of one annually. 

Due to their longer duration liabilities, life insurers’ portfolios are often heavily weighted with 

fixed-income securities because they provide greater certainty in asset cash flows. As expected 

of the L&H sector, bonds have consistently made up the bulk of cash and investments, totaling 

$3.5 trillion at year-end 2021, up by 3.9 percent from the previous year end. More than 40 

percent (or $1.4 trillion) of the bond portfolio had maturities of 10 years or greater at year-end 

2021, which was slightly higher than prior years. Of that amount, nearly 55 percent had 

maturities greater than 20 years, mirroring the previous two years, but falling from almost 59 

percent at the start of the ten-year period. As of year-end 2021, more than 27 percent of the bond 

portfolio consisted of holdings with maturities between 5 and 10 years as of year-end 2021, 

compared to 28 percent as of the prior year-end and the yearly average of 29.6 percent since 

2012. In summary, close to two-thirds of the sector’s entire bond portfolio has steadily been 

allocated to medium- to long-duration investments in each of the last 10 years, supporting the 

longer time horizon of a life insurer’s obligations. Moreover, the L&H sector has held, on 

average, more than 94 percent of its total bonds in investment-grade debt each year since 2012, 

mitigating the sector’s credit risk exposure while reinforcing its liquidity.

67 Tim Zawacki, “Annuity Structures to Limit Impact of Higher Surrenders as Rates Rise,” S&P Capital IQ, April 7, 

2022, https://www.capitaliq.spglobal.com/web/client?auth=inherit#news/article?id=69580844. 
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Changing Investment Allocations

Increased risk tolerances may be influencing the characteristics of the L&H sector’s investment 

portfolio, which can be observed in Figure 22. The shifts in investment allocations indicate that 

life insurers are accepting some increase in liquidity risk as the cost for potential higher yields. 

Notably, the share of the bond portfolio allocated to public bonds continues to follow a 

downward trend, decreasing by nearly 14 percentage points over the last 10 years.68 Moreover, 

sustained pressures on interest margins have motivated life insurers to continue seeking out 

investments that offer higher returns, but which tend to be less liquid. Additionally, noninvestment grade bonds continue to account for more than 40 percent of capital and surplus, as 

they generally have throughout the past 10 years. Finally, affiliated investments have been 

steadily on the rise since 2018, accounting for a greater proportion of capital and surplus, and 

because such investments are typically illiquid, these holdings can impact the overall quality of 

available capital.

Figure 22: A View of L&H Sector Liquidity

Source: S&P Global

In the search for yield, insurers have increasingly turned to private credit markets. Privately

placed bonds have accounted for a growing share of total bond holdings over the past 10 years, 

reaching a decade high of 39.7 percent at year-end 2021 for the L&H sector. The degree of 

information and due diligence on private-placements and private-label securities available to 

68 At year-end 2011, public bonds of $1.9 trillion made up 74 percent of the L&H sector’s bond portfolio.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

As a Share of Capital & Surplus:

Non-Investment Grade Bonds

Affiliated Investments

Current Liquidity Ratio

Public Bonds to Total Bonds

Private Bonds to Total Bonds

Year

Current Liquidity Ratio Private Bonds

Public Bonds Non-Investment Grade Bonds

Affiliated Investments
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investors is limited as compared to that for public issuers. Private placements are not required to 

be registered with the U.S. Securities & Exchange Commission, and therefore are not subject to 

disclosure and reporting requirements comparable to those for public issuers. Additionally, 

private placements are not typically assigned credit-agency ratings, making it challenging for 

investors and regulators to determine their risk. Issuers must therefore be prepared to pay 

investors a premium in exchange for taking on the potential added risk. Private placements have 

gradually climbed from a 2.2 multiple of capital and surplus at year-end 2012 to 2.9 at year-end 

2021. 

As insurers are shifting away from traditional investments towards alternative and other nontraditional investments, their investment portfolios reflect increased allocations to illiquid 

investments that are underlying policyholder reserves. The lower degree of credit and pricing 

transparency associated with these illiquid types of investments, however, can result in greater 

volatility. In support of their product mix, insurers have heightened the risk exposure of their 

portfolios to enhance yield by progressively including more examples of alternative and other 

non-traditional asset classes such as bank loans, private-label securities, and other structured 

securities like collateralized loan obligations (CLOs) and asset-backed securities (ABS). As 

illustrated in Figure 19, the L&H sector’s exposure to alternative assets, as reported on Schedule 

BA, rose sharply by 24.3 percent from prior year-end 2020 and comprised 58.2 percent of the 

entire insurance industry’s Schedule BA exposure at year-end 2021. Private equity, hedge funds, 

and real estate holdings were reported to account for the bulk of Schedule BA exposures for life 

insurers in the last two years. Private equity investments, in particular, represented the largest 

Schedule BA investment allocation by the L&H sector in 2021, increasing by over 32 percent to 

$134.1 billion from year-end 2020.69

ABS and bank loans also highlight the growth of non-traditional bond holdings for life insurers. 

These asset classes may be more susceptible to credit pressures and interest rate movements, 

especially in times of stress.70 As indicated in Figure 23, total ABS holdings of $783.0 billion 

comprised 16 percent of the L&H sector’s investment portfolio as of year-end 2021 and have 

been steadily rising in volume each year since 2015. While the L&H sector has been reducing its 

exposure to residential mortgage-backed securities year-over-year in the last decade, this has not 

been done for commercial mortgage-backed securities (CMBS), which totaled $198.3 billion in 

2021, greater than the $193.7 billion total in 2020 and an increase of nearly 32 percent from 

2012 levels. Though reaching a decade high in volume, the CMBS share of capital and surplus 

was lower at year-end 2021 (41.7 percent) as compared to year-end 2020 (44 percent). Other 

loan-backed securities (largely CLO holdings) have shown substantial growth in the last three 

years, making up nearly one-half of total ABS at year-end 2021. Other loan-backed securities 

were $387.2 billion in 2021, up from $352.1 billion and $318.3 billion in 2020 and 2019, 

69 NAIC, Capital Markets Special Report: U.S. Insurance Industry Exposure to Schedule BA Assets Exceeds $500 

Billion in 2021(2022), https://content.naic.org/sites/default/files/capital-markets-special-reports-Sch-BAYE2021.pdf. 

70 The degree and scope of the risks associated with these types of securities differ, depending on their structure. 

The securities are structured to meet investors’ risk appetites and can range from pass-throughs to complex 

tranching arrangements. Bank loans, for example, can benefit from rising rates and are somewhat insulated from 

declining credit by their position in the capital structure.
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35 

respectively. By comparison, other loan-backed securities totaled $197.2 billion and comprised 

30 percent of the ABS portfolio in 2012. 

Figure 23: L&H Sector Portfolio of Asset-Backed Securities

Source: S&P Global

In the prolonged low interest rate environment, bank loans have also represented an attractive 

investment alternative to traditional bond investments. Life insurers held 76.5 percent (or $74.4 

billion) of the insurance industry’s total bank loan investments at year-end 2021. Overall, the 

U.S. insurance industry’s total bank loan holdings have remained on an upward trajectory over 

the last four years, with about 60 percent of total bank loan holdings in 2021 consisting of 

leveraged bank loans. Notably, 10 life insurers own about 54 percent of the insurance industry’s 

total bank loan investment exposure.71

Affiliated Exposures 

Due to the more illiquid nature of affiliated holdings, significant growth in affiliated investments 

may have the potential to adversely affect an insurer’s capital base. With the exception of 2018, 

the L&H sector has expanded its holdings of affiliated cash and investments each year in the last 

10 years. Annual growth of affiliated holdings has averaged 7.7 percent since 2012. Affiliated 

investments were $244.3 billion and $213.5 billion for the years ending 2021 and 2020, 

respectively, amounting to a 14.5 percent year-over-year increase. Affiliated cash and invested 

assets made up 51.3 percent of capital and surplus as of year-end 2021, up from 48.5 percent at 

year-end 2020, and 45.7 percent at year-end 2019. The composition of the L&H sector’s

71 NAIC, Capital Markets Special Report: Significant Increase in U.S. Insurers’ Bank Loan Exposure as of YearEnd 2021 (2022), https://content.naic.org/sites/default/files/capital-markets-special-reports-bank-loans-2021.pdf. 

 $-

 $100

 $200

 $300

 $400

 $500

 $600

 $700

 $800

 $900

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Total ABS

($ billions)

Year

RMBS CMBS Other Loan-Backed Securities
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36 

affiliated investment portfolio has not materially deviated in the last five years. Affiliated 

common stock accounted for 29 percent of total affiliated holdings at year-end 2021, while 

affiliated alternative investments comprised 48 percent. Alternatives have consistently made up 

the bulk of the L&H sector’s affiliated exposures in each of the last 10 years. At year-end 2021, 

affiliated alternatives represented over 40 percent of total Schedule BA investments reported by 

the L&H sector. With a share of 17 percent, affiliated bonds made up the third largest 

concentration of affiliated investments for the sector.

72

Mitigants

Any potential liquidity concerns may be mitigated to an extent by the L&H sector’s overall 

positive financial profile as reflected in four factors. First, annual growth in cash and invested 

assets has been healthy over the last decade, averaging close to four percent, tending to enhance 

the sector’s liquidity profile and contributing to a current liquidity ratio that has remained above 

90 percent in each of the last 10 years. This suggests that the L&H sector consistently has been 

able to anticipate and fulfill its policyholder and operational needs on an ongoing basis. 

Second, investment-grade bonds have averaged over 94 percent of the aggregate bond portfolio 

annually since 2012.73 Furthermore, growth of bonds that were at or near default has trended 

sharply downward over the last three years. 

Third, while ABS holdings have increased year-over-year since 2016, the share of ABS 

underlying L&H capital and surplus has trended downward since 2018. They amounted to a 

1.65 multiple of capital and surplus at year-end 2021, down from 1.74 at year-end 2020 and 1.79 

at year-end 2018. While CMBS was one of the asset classes that suffered significantly during 

the COVID-19 pandemic, it has recently seen reductions in defaults and delinquencies. Total 

bank holdings for the entire insurance industry (L&H and P&C sectors) comprised only 1.4 

percent of the investment portfolio at year-end 2021, thus limiting the potential impacts from 

market stress on these assets. Moreover, 94 percent of these bank loan instruments had 

maturities of 10 years or less and unaffiliated bank loans accounted for close to 95 percent of 

total insurer bank loan investments, helping to mitigate both interest rate risk and liquidity 

concerns.74 Furthermore, the L&H sector’s Schedule BA exposures comprised only 5.8 percent 

of total cash and investments at year-end 2021 as compared to 4.9 percent at year-end 2020. 

Finally, mortgage loans in good standing have consistently accounted for over 99 percent of the 

sector’s entire mortgage portfolio since 2012. 

72 Cash, short-term investments, and mortgage loans combined to make up the remainder of affiliated holdings, 

representing five percent of affiliated exposures at year-end 2021.

73 Both publicly traded bonds and private placements can be assigned NAIC designations. Investment securities 

rated by one or more nationally recognized statistical rating organizations are mapped by insurers to equivalent 

NAIC designations. Such securities are exempt from filing with the NAIC’s Securities Valuation Office, which is 

responsible for the day-to-day credit quality assessment of securities owned by state regulated insurance companies 

and may produce and assign NAIC designations for investment securities that are not rated by a nationally 

recognized statistical rating organization.

74 NAIC, Capital Markets Special Report: Significant Increase in U.S. Insurers’ Bank Loan Exposure as of YearEnd 2021 (2022), https://content.naic.org/sites/default/files/capital-markets-special-reports-bank-loans-2021.pdf. 
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Fourth, despite the continued growth in the L&H sector’s holdings of affiliated cash and 

investments, on average such assets have comprised only 4.4 percent of total cash and invested 

assets annually since 2012. Moreover, the bulk of unaffiliated investments is aligned with the 

L&H sector’s fundamental asset/liability matching philosophy, with bonds accounting for more 

than three-quarters of unaffiliated holdings on average each year since 2012. Unaffiliated cash 

and invested assets were $4.7 trillion at year-end 2021, up by 4.5 percent from $4.5 trillion at 

year-end 2020 and growing at an annual pace of 3.7 percent on average over the last decade. 

Unaffiliated cash and invested assets have covered general account liabilities by a multiple of 

one in each of the last 10 years, while the contribution of unaffiliated investments to capital and 

surplus has remained unwavering and substantial at a yearly multiple of 10. All these factors 

reinforce the L&H sector’s continued ability to support its policyholder and funding 

commitments as they come due.

Box 2: Increased Focus on Private Equity in the Life Insurance Sector

The influence of private equity firms and other alternative asset managers in the life insurance 

sector continued in 2021. At year-end 2021, private-equity-owned U.S. insurers controlled in 

excess of $1 trillion of cash and invested assets, a sharp increase from $471 billion at year-end 

2020.75 This growth greatly outpaced the overall asset growth rate of U.S.-domiciled life 

insurers during the same period. A substantial amount of assets is also held by private equityowned or affiliated offshore life reinsurance entities that mostly reinsure U.S. business.76 

Private-equity-owned reinsurers are significant sources of reinsurance for U.S. domiciled 

affiliates and for unaffiliated U.S. insurers.77 Additionally, the increased interconnectivity of the 

U.S. and Bermuda insurance markets through the growth of private equity-owned insurers may 

have implications for U.S. policyholders. 

In March 2022, Senator Sherrod Brown, Chairman of the U.S. Senate Committee on Banking, 

Housing, and Urban Affairs wrote to FIO and to the NAIC, raising several concerns regarding 

the role of “[i]nvestment firms like asset managers and private equity funds” in the insurance 

industry, including but not limited to annuitization of private pension fund obligation.78 Both 

FIO and the NAIC provided responses to Senator Brown.79 For its part, FIO described both 

75 See FIO, 2021 Annual Report, 50; Kerry Pechter, “Private Equity in the Life/Annuity Biz,” Retirement Income 

Journal, April 28, 2022, https://retirementincomejournal.com/article/private-equity-in-life-annuity-biz-conferencenotes/. See also Tim Zawacki, “Large Deals Elevate Private Equity-Linked Reinsurers in US Life, Annuity 

Market,” S&P Global Market Intelligence, May 3, 2022, https://www.spglobal.com/marketintelligence/en/newsinsights/research/large-deals-elevate-private-equity-linked-reinsurers-in-us-life-annuity-market. 

76 See, e.g., Kerry Pechter, “Bermuda’s Role in a Changing Annuity Industry,” Retirement Income Journal, 

September 10, 2021, https://retirementincomejournal.com/article/bermudas-role-in-a-changing-annuity-industry/. 

77 See also Tim Zawacki, “Large Deals Elevate Private Equity-Linked Reinsurers in US Life, Annuity Market.” 

78 Letter from Senator Sherrod Brown to Steven Seitz, FIO Director, and Dean Cameron, NAIC President (March 

16, 2022), https://www.banking.senate.gov/imo/media/doc/brown_letter_on_insurance_031622.pdf. 

79 Letter from Jonathan C. Davidson, U.S. Department of the Treasury Assistant Secretary for Legislative Affairs, to 

Senator Sherrod Brown (June 29, 2022), https://www.banking.senate.gov/download/fio-85; Letter from Dean 

Cameron, NAIC President, et al. to Senator Sherrod Brown (May 31, 2022), 

https://www.banking.senate.gov/download/naic-may.
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FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

38 

potential risks and potential benefits of the expanding roles of private investment management 

firms as owners of insurers and as third-party asset managers for insurers, including specific 

attributes of these activities that may necessitate additional supervisory attention. As noted in its 

response to Senator Brown, FIO has been engaging with the NAIC and state regulators to 

consider the potential impact of these trends and relevant market developments, including 

whether the current regulatory framework should be modified so that it continues to enable 

regulators to safeguard policyholder interests and address potential macroprudential risks in this 

area. As detailed in its letter, FIO has identified four areas of priority for its continued analysis 

and engagement:

Liquidity: Liquidity and the appropriate regulatory responses in view of the transition from 

traditional asset classes such as bonds to more non-traditional classes that are higher yielding but 

less liquid, including real estate, CLOs and other privately structured securities. 

Credit Risk/Capital Adequacy: Credit risk and loss-absorbing capacity and the appropriate 

regulatory response in view of activities that link affiliated origination platforms, securitization 

strategies, and asset allocation approaches.

Offshore Reinsurance Implications: Monitoring the growth of offshore reinsurance and 

assessing why segments of the market are increasing their reliance on affiliated and unaffiliated 

offshore reinsurance entities.

Conflicts of Interest: Issues regarding potential conflicts of interests arising from management 

and investment fee structures and sourcing from affiliated origination platforms. 

FIO will continue to monitor developments in this space and to consider implications for 

policyholders and the financial system, and will provide an update in future annual reports.

Property and Casualty Sector

This section presents additional analysis of the financial performance of the P&C sector in 2021 

and then assesses the P&C sector’s overall financial condition as of December 31, 2021, 

including a trend analysis of the last 10 years. 

Financial Performance

i. Direct and Net Premiums Written 

Figure 24 shows the 2021 composition of P&C sector direct premiums written by lines of 

business, while Figure 25 shows a longer-term view of the amount and composition of direct 

premiums written by major lines of business. For 2021, total P&C sector direct premiums 

written reached a record level at $798 billion, marking a nine percent increase over 2020 levels

and the highest annual growth in the past decade. Direct premiums written for personal lines of 

business increased by six percent compared to 2020, while direct premiums written for 

commercial lines of business increased by 14 percent. The absence of additional pandemicrelated premium reductions, as had been instituted in 2020 in personal auto insurance, coupled 
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FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

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with approved rate increases, drove top line growth in this line of business. In addition, miles 

driven returned to pre-pandemic levels and premiums increased for usage-based insurance. 

Overall, personal auto insurance direct premiums written increased by five percent in 2021. 

Homeowners insurance also saw rate increases, contributing to premium growth of eight percent 

for this line.80 Rate increases and a return to more normal miles driven boosted commercial auto 

insurance direct premiums written by 17 percent. Pricing discipline and a harder market for 

commercial property and multi-peril lines led premiums to gains of 10 percent and 7 percent, 

respectively, in those lines.81 Net reinsurance premiums ceded increased by 11 percent, 

consistent with the overall gain in business. Net premiums written were also a record in 2021 at 

$716 billion, an increase of nine percent over 2020. 

Figure 24: P&C Sector Composite of Direct Premiums Written

Source: S&P Global

80 David Blades, P/C Snapshot: Insurers Navigate Pandemic and Elevated Secondary Perils (June 13, 2022), 3, 

https://news.ambest.com/research/DisplayBinary.aspx?TY=P&record_code=320760&URatingId=2562038&AltSrc

=108&_ga=2.255739400.104803370.1661035661-235444461.1646407991. 

81 Blades, P/C Snapshot, 7-8.

A&H 

1%

Other 

5% Commercial Auto

6%

Commercial Multi 

Peril 

6%

Fire & Allied 

7%

Homeowner & 

Farmowner 

15%

Marine Lines 

4% Other Product Liability 

12%

Private Auto 

36%

Workers' Comp

8%
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FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

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Figure 25: P&C Sector Direct Premiums Written

Source: S&P Global

Box 3: Cyber Insurance Market

U.S. insurers continued to report growth in the cyber insurance market (package and stand-alone 

policies) in 2021, with approximately $5.1 billion in direct premiums written, a 68 percent 

increase over 2020’s approximately $3 billion. However, this still is significantly under one 

percent of the total P&C market.82 The growth appears linked to significant increases in 

premiums—a 96 percent increase in cyber insurance pricing on average, by one estimate.83

Roughly the same number of insurers provided cyber insurance in 2020 and 2021—that is, 780 

82 Cyber insurance market figures are based on data from S&P Global (which are derived from data reported to state 

insurance regulators) in order to facilitate comparability with other market data figures in Section II. See also Tom 

Jacobs and Hassan Javed, “Insurers Revisit Cyber Coverage As Demand, Premiums Spike,” S&P Global Market 

Intelligence, July 7, 2022, https://www.spglobal.com/marketintelligence/en/news-insights/latest-newsheadlines/insurers-revisit-cyber-coverage-as-demand-premiums-spike70880071#:~:text=Premiums%20skyrocketing,S%26P%20Global%20Market%20Intelligence%20analysis. For 

more information on cyber insurance, see Box 1 and also see FIO, 2021 Annual Report, 74-77; FIO, 2022 TRIP 

Effectiveness Report, 59-74.

Since 2018, Treasury has collected data on cyber premiums in TRIP-eligible lines of insurance and reported on its 

most recent TRIP data call, including new cyber elements, in its 2022 TRIP Effectiveness Report. The TRIP data 

call figures differ from those reported to the states for various reasons related to the different scopes of the 

respective calls. 

83 See “Cyber Insurance Market Overview: Fourth Quarter 2021,” Marsh, 

https://www.marsh.com/us/services/cyber-risk/insights/cyber-insurance-market-overview-q4-2021.html. See also

FIO, 2021 TRIP Effectiveness Report, 66.

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Direct Premiums Written 

($ billions)

Year

Personal P&C Direct Premiums Commercial P&C Direct Premiums

Accident & Health Direct Premiums
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insurers—based upon those who reported any non-zero amount of premiums written.84 Overall, 

however, as shown in Figure 26, the cyber insurance market remains concentrated, with the top 

10 cyber writers holding a combined market share of 55.3 percent, down from 63 percent in 

2020. The top 25 cyber writers combined hold nearly 85 percent of the cyber insurance market. 

Figure 26: P&C Insurance Groups by U.S. Cyber Direct Premiums Written

2020 

Rank

2021 

Rank Insurance Group

2020 Direct 

Premiums 

Written ($000)

Share of 

Total (%)

2021 Direct 

Premiums 

Written ($000)

Share of 

Total (%)

1 1 Chubb $ 404,197 13.4 $ 473,129 9.3

8 2 Fairfax Financial 108,530 3.6 436,448 8.6

2 3 AXA SA 293,025 9.7 421,014 8.3

4 4 Travelers 230,629 7.7 257,370 5.1

11 5 Tokio Marine 86,334 2.9 249,785 4.9

3 6 AIG 233,642 7.8 246,011 4.9

5 7 Beazley plc 177,746 5.9 200,878 4.0

7 8 CNA 119,612 4.0 181,383 3.6

31 9 Arch Capital 16,043 0.5 171,226 3.4

6 10 AXIS 133,550 4.4 159,059 3.1

Combined Top 10 $ 1,890,381 62.9 $ 2,796,302 55.3

Combined Top 25 $ 2,529,743 84.1 $ 4,265,999 84.3

Combined Top 100 $ 2,962,072 98.5 $ 5,005,473 98.9

Total U.S. Cyber Premiums $ 3,007,759 100.0 $ 5,060,714 100.0

Source: S&P Global

ii. Underwriting Results

Figure 27 shows the P&C sector combined operating ratio and its composition for the past five

years.85

84 When looking only at those who provided more than de minimis coverage, however, the number of insurers drops 

to about 600—which is still a substantial increase over the roughly 300 insurers in this market in 2015.

85 S&P Global ratios include the policyholder dividend ratio for transparency to the public and investors because 

dividends represent a cash outlay.
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Figure 27: P&C Sector Combined Operating Ratios 

2017 2018 2019 2020 2021

 Loss Ratio 64.14 60.71 60.05 59.34 62.38

 Loss Adjustment Expense Ratio 11.76 10.70 10.98 10.80 10.15

Loss and Loss Adjustment Expense Ratio 75.91 71.42 71.03 70.13 72.53

 Net Commission Ratio 10.29 11.26 11.00 11.27 11.05

 Salaries & Benefits Ratio 7.91 7.38 7.40 7.43 7.16

 Tax, License & Fees Ratio 2.47 2.39 2.34 2.31 2.29

 Administrative & Other Expense Ratio 6.67 6.25 6.45 6.46 6.02

Expense Ratio 27.34 27.28 27.20 27.47 26.52

Policyholder Dividend Ratio 0.61 0.62 0.78 1.19 0.67

Combined Ratio 103.85 99.32 99.01 98.80 99.72

Source: S&P Global

The combined ratio for the P&C sector increased to approximately 99.7 percent in 2021 from 

98.8 percent in 2020, reflecting a decline in underwriting profit.86 Catastrophe losses of nearly 

$100 billion in 2021 were notably more severe than in 2020, with 20 separate billion dollar 

catastrophic events in the United States in 2021.87 Adding to the increase in losses was higher 

claims severity in personal auto insurance as miles driven returned to pre-pandemic levels and 

medical and repair costs rose significantly. Reserve development was again favorable in 2021, 

adding to underwriting profits. Figure 28 shows losses from catastrophic events in the United 

States since 2017, and Figure 29 shows reserve development over the same period.88 

Additionally, the expense ratio decreased one percent from 2020 to 2021. 

86 A combined ratio of greater than 100 percent would indicate that premiums did not cover losses and expenses in a 

given period (i.e., underwriting operations made a negative contribution to net income) and, therefore, that a 

company did not generate an underwriting profit. Investment income, realized capital gains/losses, and income 

taxes are not considered in the combined ratio.

87 David Blades, Publicly-Traded P/C Insurers Post Strong Gains Despite Catastrophes (April 11, 2022), 

https://news.ambest.com/research/DisplayBinary.aspx?TY=P&record_code=319008&URatingId=2562038&AltSrc

=108&_ga=2.59244717.104803370.1661035661-235444461.1646407991. 

88 Favorable reserve development occurs when the current year actuarial estimates of losses arising from business 

written in previous years are less than the previous estimates for that year, thereby freeing reserves to contribute to 

the insurer’s bottom line.
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Figure 28: Estimated Insured Property Losses, U.S. Catastrophic Events

Note: Losses are adjusted for inflation through 2020 by the Insurance Information Institute using the Gross Domestic 

Product (GDP) implicit price deflator.

Sources: Insurance Information Institute; Property Claim Services, a unit of ISO, a Verisk Analytics Company; U.S. 

Bureau of Economic Analysis.

Figure 29: Total One Year Reserve Development for the P&C Sector

Note: Reflects total incurred net loss development for all accident years.

Source: S&P Global

80

90

100

110

$0

$20

$40

$60

$80

$100

$120

$140

$160

2017 2018 2019 2020 2021

Number of Events

Estimated Insured Losses

($ billions)

Year

Total Insured Losses (left axis) Number of Events (right axis)

$0

$2

$4

$6

$8

$10

$12

$14

$16

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Reserve Development 

($ billions)

Year
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iii. Investment Income

Net investment income for the P&C sector increased by five percent to $56 billion in 2021, while 

cash and invested assets balances increased by 11 percent to $2.2 trillion. As a result, the net 

yield on invested assets declined to 2.64 percent in 2021 from 2.75 percent in 2020. Figure 30 

depicts a longer-term view of the trends in net investment income and net yield on invested 

assets for the P&C sector. Realized capital gains and losses are reported separately and are not a 

component of net investment income. P&C insurers are less dependent than L&H insurers on 

net investment income to fund losses and expenses, given the shorter contract terms and shortertailed losses, and net investment income accounted for approximately seven percent of total P&C 

sector revenues in 2021, a measure lower than the ten-year historical average of nine percent. 

Strong gains in income from other invested assets as reported in Schedule BA, preferred stocks, 

and common stocks more than offset slightly lower income from fixed income securities.

Figure 30: P&C Sector Annual Net Investment Income

and Net Yield on Invested Assets

Source: S&P Global

Realized capital gains on investments increased significantly, rising by 72 percent, as the sector 

took advantage of strong equity market performance. The P&C sector recorded net realized 

capital gains of $17.9 billion, up from $10.4 billion in 2020. Significantly higher gains on equity 

securities and derivative instruments that more than offset lower gains in other invested assets 

and fixed income securities caused the increase in net realized capital gains.

$50.3 $49.3

$54.9

$48.8 $47.5 $49.7

$57.0 $56.3

$53.4

$56.0

2.0%

2.2%

2.4%

2.6%

2.8%

3.0%

3.2%

3.4%

3.6%

3.8%

4.0%

$0

$10

$20

$30

$40

$50

$60

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

$ billions

Year

Net Investment Income (left axis) Net Yield on Invested Assets (right axis)
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iv. Net Income

The P&C sector’s net income increased by four percent in 2021 to $63.4 billion from the $60.7

billion reported in 2020, as shown in Figure 31. Despite strong growth in net premiums earned 

(up seven percent) in 2021, the sector concluded with a slight underwriting loss as compared to a 

gain of $11.9 billion in 2020. The decline in underwriting profit was more than offset, however, 

by the increase in net investment income and a significant increase in realized capital gains. 

Pre-tax operating income therefore increased by four percent to $72 billion in 2021 from $69.4

billion in 2020. A similar four percent increase in federal income taxes maintained the increase

in net income of four percent.

Figure 31: P&C Sector Net Income

Source: S&P Global

Figure 32 displays key measures of returns for the P&C sector. The 2021 pre-tax operating 

margin decreased to 7.3 percent from 8.5 percent in 2020; this decline was due to the strong 

growth in revenues that was not matched by the increase in pre-tax operating income. 

Additionally, strong results in personal auto lines in 2020 due to pandemic-related lockdowns 

diminished as conditions normalized, decreasing operating results in 2021. The 2021 return on 

average equity of 6.4 percent was below the 6.8 percent mark for 2020, and below the average of 

nearly eight percent for the past 10 years. This decline was due to the strong growth in 

policyholders’ surplus (up 12 percent) in 2021 that outpaced the increase in net income.

-$40

-$20

$0

$20

$40

$60

$80

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

$ billions

Year

Net Investment Income Net Underwriting Gain (Loss) Net Income
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Figure 32: P&C Sector Operating Ratios

Source: S&P Global

Financial Condition

This section analyzes the financial condition of the P&C sector at the end of 2021 and examines 

trends over the last 10 years from 2012 through 2021, focusing on surplus, assets, and liquidity.

i. Surplus as Regards Policyholders

Like the L&H sector, the P&C sector weathered the lingering effects of the COVID-19 pandemic 

in 2021, growing policyholder surplus to record highs. Net income of $63.4 billion and an 

increase in net unrealized capital gains of $90.3 billion were key to raising the sector’s surplus to 

a 10-year high of $1.1 trillion in 2021. Policyholder surplus levels exhibited a 13.3 percent yearover-year increase from 2020, contributing to a yearly average growth rate of 6.6 percent over 

the last 10 years. The pro-forma removal of capital contributions in the form of surplus notes 

results in an even higher annual growth rate over the same period, averaging 6.8 percent.

The P&C sector was able to expand policyholder surplus organically in 2021 through growth in 

net premium earned of $47.5 billion combined with investment income of $73.9 billion that 

resulted in positive earnings. Surplus was further enhanced by a considerable increase in net 

unrealized capital gains. Stockholder dividends partially eroded surplus growth in 2021, though 

less so than in the prior year. The P&C sector paid stockholder dividends of $34.4 billion in 

2021, down from a 10-year high of $46.1 billion in 2020 when P&C insurers provided premium 

0

2

4

6

8

10

12

14

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Percent

Year

Pre-Tax Operating Margin Return on Average Equity (Policyholder Surplus)

Pre-Tax Operating Return on Average Equity Return on Average Assets
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refunds and rebates to policyholders during the COVID-19 pandemic.89 Stockholder dividends 

have reduced policyholder surplus by 4.7 percent on average in each of the last 10 years, which 

is less than the L&H sector average due to the P&C sector’s larger surplus base. Net realized 

capital gains have consistently contributed to generating capital for the P&C sector, adding 1.8

percent on average annually to prior year-end policyholder surplus over the last 10 years, and 

unrealized capital gains have enhanced surplus by 3.7 percent.

As shown in Figure 33, the P&C sector has been able to continue managing its leverage. In 

2021, the leverage ratios declined between three and eight basis points, reflecting a positive 

contribution to the P&C sector’s financial flexibility. As in the previous two years, this leverage 

enhancement can largely be attributed to the annual pace at which policyholder surplus expanded

in 2021 relative to the year-over-year growth rates of the variables that constitute the numerators 

of the leverage ratios under examination. All three leverage ratios—total loss and loss 

adjustment expenses reserves, asset leverage, and net leverage—achieved 10-year lows in 2021.

Figure 33: P&C Sector Leverage Ratios

Source: S&P Global

Though they measure different exposures, the asset and net leverage ratios presented in Figure 

33 had been closely aligned for most of the past decade. In 2018, the ratios began to diverge to 

some degree. In addition to maintaining underwriting discipline and addressing exposure 

accumulations, balance sheet strength can be affected by the volatility and credit quality of the 

89 For more on the pandemic’s impact on the insurance industry, see FIO, 2021 Annual Report, 56-64.

 -

 0.3

 0.6

 0.9

 1.2

 1.5

 1.8

 2.1

 2.4

 2.7

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

As a Multiple of Policyholder Surplus

Year

Total Loss and Loss Adjustment Expense Reserves

Asset Leverage

Net Leverage (net writings and liabilities)
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investment portfolio, reinsurance recoverables, and agents’ balances.90 The steady pace of the 

asset leverage ratio in the last three years, in particular, indicates that the P&C sector has been 

growing surplus by effectively managing its vulnerabilities to market risks including credit and 

interest rate risks. Over the past 10 years, the asset leverage ratio has ranged between a high of 

2.49 in 2012 and a low of 2.26 in 2021, with an annual average of 2.36.

The net leverage ratio indicates the degree of exposure stemming from pricing errors in the book 

of business and from reserving errors. Apart from 2018, the net leverage ratio has generally 

declined over the past 10-year period. By successfully evaluating its underwriting risk and 

maintaining reserve adequacy, the P&C sector has improved its financial capacity to support its 

business.91 In particular, liabilities (the larger component in the ratio’s numerator) of $1.6 

trillion were 1.49 times policyholder surplus at year-end 2021, improving from 1.54 at year-end 

2020 and 1.77 at year-end 2012. Net premiums written were $716.1 billion in 2021, up from 

$655.5 billion in 2020, making up 68 percent and 71 percent of policyholder surplus for the same 

two years, respectively.

Growth in both direct writings and net reinsurance premiums affected the net premiums written 

component of the net leverage ratio in 2021. Direct writings were $797.7 billion and $729.0 

billion in 2021 and 2020, respectively, amounting to a year-over-year increase of 9.4 percent. 

Net reinsurance premiums (ceded premium less assumed premium) resulted in cessions of $81.5 

billion in 2021, 11 percent higher than cessions of $73.5 billion in 2020.

At year-end 2021, the ratio of loss and loss adjustment reserves to policyholder surplus was 0.75, 

declining from 0.78 at year-end 2020. Loss and loss adjustment expense reserves were $784.8 

billion and $721.8 billion in 2021 and 2020, respectively. This ratio has progressively decreased 

in the last 10 years, demonstrating that the P&C sector in the aggregate has remained consistent, 

in its management and estimation of reserves to cover potential losses and adjustment costs 

arising from claims made on policies underwritten.

ii. Assets

The health of the P&C sector’s capital position over the last 10 years is further reinforced by 

consistent year-over-year growth and alignment of asset holdings. Total assets grew by 11 

percent to $2.6 trillion at year-end 2021—this was the highest yearly increase in more than a 

decade. Exhibiting an annual expansion of 5.2 percent on average over the last decade, asset 

growth has helped to sustain the P&C sector’s financial health. In each of the last 10 years, more 

than 84 percent of the asset portfolio has consistently been comprised of cash and invested 

assets, reflecting the strength of the sector’s balance sheet to pay claims.

90 Agents’ balances refer to net admitted uncollected premiums and agents’ balances in the course of collection, 

including direct and group billed uncollected premiums; amounts collected but not yet remitted to home office; 

accident and health premiums due and unpaid; life insurance premiums and annuity considerations uncollected on 

in-force business (less premiums on reinsurance ceded and less loading); and title insurance premiums and fees 

receivable. Reinsurance balances payable are not deducted.

91 All the ratios experienced an uptick in 2018 due to a decline in surplus combined with heightened exposures.
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The configuration of the P&C sector’s asset portfolio has remained nearly constant for the last 10 

years as well. Figure 34 illustrates the composition of the P&C sector’s assets at year-end 2021, 

which largely mirrors that of prior years.

Figure 34: Composition of Asset Portfolio for P&C Sector

Source: S&P Global

Cash and invested assets have consistently been the largest component of total assets for the 

P&C sector, followed by premiums and considerations due.

As Figure 35 details, in 2021 the P&C sector raised its investment exposure to common stock 

holdings by almost 3 percentage points and reduced its allocation to bond investments by over 2 

percentage points from the previous year. Asset growth rates reflect this movement, with 

common stock investments rising by over 23 percent in 2021, while bonds grew by 6.6 percent. 

Although bonds made up about 63 percent of the P&C sector’s investment portfolio on average 

in each year during the first half of the last 10 years, that allocation has averaged just under 57 

percent in the latter half of the decade. Common stock investments have remained the second 

largest holding, averaging over 23 percent of the P&C sector’s investment portfolio since 2012, 

with a significant uptick in 2021.

Total Cash & 

Investments

85.2%

Premiums and 

Considerations Due

8.8%

Reinsurance 

Recoverable

2.6%

Receivable from 

Parent, Subsidiary or 

Affiliates

0.9%

All Other Admitted Assets

2.4%
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Figure 35: Composition of P&C Sector’s Investment Portfolio

2017 2018 2019 2020 2021

Bonds 57.9% 60.3% 57.0% 55.4% 53.1%

Preferred Stocks 0.3% 0.3% 0.8% 0.8% 0.8%

Common Stocks 24.2% 22.9% 25.9% 25.8% 28.6%

Mortgage Loans 1.0% 1.2% 1.2% 1.2% 1.2%

Real Estate 0.8% 0.8% 0.7% 0.7% 0.6%

Contract Loans 0.0% 0.0% 0.0% 0.0% 0.0%

Derivatives 0.0% 0.0% 0.0% 0.0% 0.0%

Cash & Short-Term Investments 6.9% 6.0% 6.2% 7.0% 7.1%

Other Investments 8.9% 8.5% 8.2% 9.1% 8.6%

Total Cash & Invested Assets 100% 100% 100% 100% 100%

Source: S&P Global

The composition of investment holdings shown in Figure 35 aligns with the risk management 

practices employed by the sector to address both the shorter-term obligations of some P&C lines 

(such as auto liability) as well as longer-tailed liabilities (such as medical malpractice and 

workers’ compensation). Annual growth in total bond holdings has accelerated in recent years, 

averaging 4.9 percent since 2018, up from an average annual growth rate of 1.4 percent from 

2012 to 2017. Year-over-year growth in common stocks has fluctuated over the past 10 years, 

achieving an 11.4 percent annual growth rate on average. Total bonds, both short-term and longterm combined, were $1.3 trillion at year-end 2021, up by 7.4 percent from the previous yearend. Of the entire bond portfolio, close to 93 percent has consistently been comprised of longterm bonds every year since 2012. Almost 55 percent had maturities of less than five years on 

average each year, while bonds with durations ranging between 5 and 10 years averaged 32 

percent of the bond portfolio in the last 10 years. P&C insurers allocated significantly less to 

longer duration bonds, with just over 13 percent on average consisting of bonds with maturities 

greater than 10 years; this shift may be the result of higher inflation.

While publicly traded bonds continue to make up the majority of the sector’s investment 

portfolio, a shift from publicly held bonds to private placements has become increasingly 

evident. Private placements comprised 19.9 percent or $254.6 billion of the $1.2 trillion 

aggregate bond portfolio at year-end 2021, climbing from 17.8 percent at year-end 2020 and 

rising by nearly 3 times (from $87.1 billion) at year-end 2012. The share of the sector’s 

investment portfolio allocated to equities reached a 10-year high in 2021, growing by a multiple 

of 2.8 over that period. Common stock investments were $638.4 billion in 2021, up from $518.6 

billion at year-end 2020 and $227.3 billion at the beginning of 2012. Bonds as a share of cash 

and investments have declined by more than 14 percentage points since the start of the decade in 

2012, while common stock holdings have increased by nearly 12 percentage points over the 

same period. Also, while still a small percentage of total cash and invested assets, mortgage 

loans have shown significant year-over-year growth in P&C insurers’ portfolios since 2012. 

Total mortgage loans were $27.0 billion at year-end 2021, accounting for 1.2 percent of cash and 

invested assets but 5.4 times the value of mortgage loan holdings of $5.0 billion at the start of the 

10-year time period under review.
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In short, as with the L&H sector, the P&C sector has been gradually repositioning its investment 

holdings, which can be attributed to both market performance and the reach for yield. The 

effects of a prolonged low interest rate environment have been driving insurers to move away 

from more traditional bond holdings and increasingly toward alternative and non-traditional 

investments that not only are less correlated with their fixed-income portfolios but can also 

provide the potential for increased returns. As interest rates continue to climb and interest 

margins loosen, investment allocations may also evolve differently in the near term.

iii. Liquidity

The P&C sector enhanced its liquidity levels overall in 2021, likely in part in response to 

emerging inflationary pressures. Figure 36 illustrates a noticeable increase in liquidity metrics, 

all of which reached 10-year highs in 2021. With benefits and loss-related payments eroding

considerably less of the sector’s premium receipts, P&C insurers have had positive net cash 

flows from operations in each of the last 10 years. Recent net cash flows from operations were

$127.4 billion and $100.9 billion in 2021 and 2020, respectively. On a cash basis, the annual 

growth rate of net premium receipts has averaged 5 percent compared to only 2.9 percent for 

benefits and losses paid, and has resulted in a coverage ratio of at least 1.64 in each of the last 10 

years. As Figure 36 demonstrates, premiums collected, net of reinsurance, exceeded benefit and 

loss-related payments by 88 percent and 87 percent for the years ending 2021 and 2020, 

respectively.92

92 The liquidity analysis here is based on cash inflows and outflows—premiums that were collected as well as 

benefit and loss-related payments made during the year. This contrasts with the income statement analysis that 

refers to premiums earned and written, and captures dividends and incurred loss and loss adjustment expenses, 

among other items.
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Cash Flows

Figure 36: A View of P&C Sector Liquidity

Source: S&P Global

Positive year-over-year net cash flows from operations have contributed to an average annual 

growth rate of 8.6 percent in cash and short-term investments over the last 10 years, expanding 

the P&C sector’s financial flexibility. Liquid assets (the numerator of the current liquidity ratio) 

have been at least 2.1 times the level of aggregate policyholder surplus each year since 2012, 

contributing to a steady current liquidity ratio over the recent 10-year period.93

Changing Investment Allocations

Although the P&C sector improved its liquidity position overall in 2021, investment allocations 

have continued to shift as the sector has been searching for more attractive yields because of the 

sustained low interest rate environment. The P&C sector’s net yield on invested assets continued 

its descent to a 10-year low of 2.64 percent as of year-end 2021 compared to 2.75 percent as of 

year-end 2020, and 3.83 percent at the beginning of the last decade. Within the bond portfolio, 

private-placement bonds have been making up a progressively greater share of policyholder 

93 Current liquidity is used to determine the amount of liabilities that can be covered with liquid assets. It is 

calculated as follows: the numerator equals net admitted cash and investments less the sum of net admitted first lien 

real estate loans, net admitted real estate loans less first liens, net admitted occupied properties, net admitted income 

generating properties, net admitted properties held for sale, affiliated long-term bonds, and affiliated preferred stock; 

the denominator equals total liabilities less ceded reinsurance premiums payable.

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

 $-

 $20

 $40

 $60

 $80

 $100

 $120

 $140

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Net Cash Flows 

($ billions)

Year

Net Cash Flows from Operations

Premium Collected / Benefit & Loss-Related Payments (right axis)

Current Liquidity Ratio (right axis)

Cash, Common Stock, Investment-Grade Bonds / Liabilities (right axis)
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surplus since 2012. Private placements supported 24.2 percent of the P&C sector’s surplus at 

year-end 2021, up from 22.9 percent at year-end 2020 and up from 13 percent at year-end 2011. 

Notably, annual growth in private placements averaged 13.4 percent over the past 10 years, 

while yearly growth in publicly traded bonds averaged only 1.5 percent.

Similar to the L&H sector, the P&C sector has also experienced growth in alternative assets, as 

illustrated in Figure 37, with the P&C sector having a greater allocation to alternative assets than

the L&H sector. As of year-end 2021, alternatives comprised over nine percent of P&C insurers’ 

aggregate investment portfolio versus 5.8 percent held by L&H insurers. However, the 

significant differences in surplus levels between the two sectors illustrate their relative risk 

exposures from these investments. Alternatives only made up 19.5 percent of policyholder 

surplus for the P&C sector as compared to 60 percent for the L&H sector.

Figure 37: Growth of Alternative Investments Held by P&C Sector

Source: S&P Global

The P&C sector’s exposure to alternative assets, as reported on Schedule BA, was $204.9 billion 

at year-end 2021, a 4.3 percent increase from year-end 2020, and comprised 41.8 percent of the 

entire insurance industry’s Schedule BA exposure. Similar to the L&H sector, private equity, 

hedge funds, and real estate holdings accounted for the bulk of Schedule BA exposures for P&C 

insurers in the last two years. Unlike the L&H sector, however, the P&C sector’s Schedule BA 

has been primarily concentrated in hedge funds, not private equity. Hedge funds represented

more than 47 percent of the P&C sector’s Schedule BA exposure at year-end 2021, up from 44.2 

percent at the previous year-end. Private equity and real estate together accounted for 27 percent 

and 21 percent of the sector’s Schedule BA exposure for the same two years, respectively.94

94 NAIC, Capital Markets Special Report: U.S. Insurance Industry Exposure to Schedule BA Assets.

7.5%

8.0%

8.5%

9.0%

9.5%

10.0%

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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Year

Alternative Investments Share of Cash and Investments

Share of Cash and Investments 

Alternative Investments 

as Reported on Schedule BA 

($ billions)
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Until 2021, the P&C sector’s growth in holdings of securities issued by U.S. federal, state, and 

local governments had generally been less than that of revenue bond investments. In 2021, 

however, government bond holdings jumped by close to 15 percent from the previous year, while 

revenue bond exposure grew by less than four percent, raising the 10-year average annual growth 

rate of government bonds to 2.2 percent for 2012 through 2021, compared to less than 0.4 

percent for 2011 through 2020. The composition of the two bond classes within the aggregate

bond portfolio has remained relatively stable over the last decade. About 68 percent of all bond 

holdings on average have consisted of some form of revenue bond investments, including special 

revenue and industrial revenue bonds, while U.S. government bonds have accounted for another 

28 percent. While revenue bonds can often be issued by local or municipal governments, the 

debt service is tied to the specific revenues generated from a project and is not backed by the full 

faith and credit of the municipality. Thus, the credit risk exposure for these types of bond 

holdings is heightened for the bondholder, i.e., repayment becomes a risk exposure to the insurer 

if the entity responsible for repayment becomes financially distressed. As of year-end 2021, 

revenue bond holdings totaled $866.1 billion, rising from $833.4 billion as of year-end 2020. 

Government bonds totaled $355.6 billion and $309.5 billion for the same periods, respectively. 

While investment-grade bond holdings have expanded consistently each year since 2012, that 

growth generally has been less than the growth in non-investment grade bond holdings. 

Specifically, annual growth in non-investment grade bonds averaged 17 percent in the last three 

years alone, while growth in investment-grade bonds averaged 5.1 percent annually. In terms of 

value, investment-grade bonds were $1.2 trillion in 2021 compared to $1.1 trillion in the 

previous two years. Non-investment grade bonds totaled $68.5 billion as of year-end 2021, 

rising from $61.3 billion and $49.8 billion for the years ending 2020 and 2019, respectively. 

Averaging an annual growth rate of over 4.5 percent in the last 10-year period, ABS constituted a 

significant share of policyholder surplus at close to 27 percent at year-end 2021. As noted in 

Section II.A.2.b.iii, ABS can be relatively more susceptible to market pressures as compared to 

bond holdings due to their greater opacity and illiquidity. Total ABS held by the P&C sector 

were $281.4 billion in 2021 compared to $264.3 billion and $266.4 billion in 2020 and 2019, 

respectively. Figure 38 shows the composition of the P&C sector’s ABS portfolio since 2012. 

While holdings of residential mortgage-backed securities dropped by nearly 3.5 percent at yearend 2021, they still comprised over 37 percent of the P&C sector’s ABS portfolio. By contrast, 

CMBS investments continue to show year-over-year growth, averaging 9.7 percent since 2012. 

CMBS holdings of $76.6 billion in 2021, a 7.1 percent annual increase, were 2.3 times 2012 

levels and constituted 27.2 percent of all ABS held. Other loan backed securities (largely, CLO) 

made up the fastest growing category of ABS, expanding at an annual rate of 11 percent on 

average in the past 10 years and by nearly 15 percent since 2018. They totaled $99.4 billion as 

of year-end 2021, representing a 19 percent upsurge from year-end 2020 and a 2.5 multiple of 

2012 levels. 
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Figure 38: P&C Sector’s Asset-Backed Securities

Source: S&P Global

Affiliated Exposures

Affiliated holdings are a potential source of liquidity risk for the P&C sector. In addition to the 

potential liquidity risk for these types of investments, their interconnectedness may have adverse 

implications for the holder. Figure 39 shows the growth and shift in the composition of affiliated 

investments in the P&C sector over the past 10 years. After two consecutive years of material 

growth in affiliated holdings, the sector reduced its affiliated exposure at year-end 2021. Total 

affiliated holdings were $237.2 billion at year end 2021, declining from $242.8 billion at the 

previous year end. Apart from 2018 and 2021, the P&C sector has shown positive year-overyear growth in affiliated holdings during the last 10 years. Affiliated cash and investments 

constituted 10.6 percent of the P&C sector’s total cash and investments at year-end 2021, down 

from 12.1 percent and 11.4 percent for the years ending 2020 and 2019, respectively. Affiliated 

alternatives in Figure 39 include surplus notes, limited partnerships, joint ventures, hedge funds, 

private equity funds, and direct investments, which totaled $127.4 billion and $131.3 billion in 

2021 and 2020, respectively. Like the L&H sector, affiliated alternative investments have come 

to dominate P&C affiliated holdings. Alternatives have nearly doubled in value since 2012, 

growing by 7.5 percent on average year-over-year, and made up almost 54 percent of total 

affiliated exposures at year-end 2021.

$0

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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Total ABS

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Year

RMBS CMBS Other Loan-Backed Securities
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Figure 39: P&C Sector’s Affiliated Exposures

Notes: “Other” refers to affiliated cash and short-term investments as well as affiliated mortgage loans. “Stocks” 

encompass both affiliated preferred and common stock.

Source: S&P Global

Mitigants

Several factors help to support the continued ability of the P&C sector to withstand market stress 

and manage its liquidity needs. First, high quality bonds still make up the overwhelming bulk of 

the sector’s portfolio of fixed-income securities. Investment-grade bonds have comprised at 

least 95 percent of the P&C sector’s bond portfolio in each of the last 10 years and averaged 

close to 61 percent of aggregate cash and invested assets. The ratio of investment-grade bonds to 

policyholder surplus has averaged at a 1.4 multiple each year, illustrating the sector’s quality of 

capital. Second, while non-investment grade bonds grew to $68.5 billion at year-end 2021, they

still accounted for just 6.5 percent of policyholder surplus (compared to 6.6 percent at year-end 

2020). Third, ABS have taken up a decreasing share of both policyholder surplus and the 

sector’s bond portfolio over the last three years, while Schedule BA holdings made up 9.2 

percent of cash and investments at year-end 2021 compared to nearly 10 percent at the year-end 

2020. Fourth, unaffiliated cash and invested assets have been twice the level of policyholder 

surplus each year since 2012, mitigating to some degree concerns of elevated affiliated 

investment exposures. Finally, unaffiliated bond holdings have accounted for close to two-thirds 

of the P&C sector’s unaffiliated investment portfolio on average in each of the last 10 years, 

providing stable cash flows against underwriting results. Another 21 percent on average has 

been allocated to unaffiliated common stock investments, establishing a marketable source of 

funding to cover obligations.

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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Share of Total

Affiliated Holdings

($ billions)

Year

Alternatives Bonds Stocks Other
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Market Performance

Stock price movements are indicators of investors’ perceptions about the recent financial results 

and future financial prospects of a firm, an industry sector, or in a broader context, the general 

economy. The discussion that follows considers the price performance of stock indices for the 

L&H and P&C sectors, as compared to the performance of the S&P 500.

For the ten-year period ending December 31, 2021, both the L&H and P&C sector stock price 

indices significantly underperformed the S&P 500, as shown in Figure 40. In that period, the 

L&H index appreciated 115 percent, the P&C index gained 195 percent, and the S&P 500 

increased by 279 percent. Over most of the last 10 years, except for September 2015 to 

December 2016, the L&H index has consistently underperformed the broader market. The P&C 

sector has only fared slightly better, underperforming the broad market longer-term with two, 

two-year long periods of outperformance. In the short-term, for 2021, both the L&H and the 

P&C stock indices also underperformed the S&P 500, gaining 21 percent and 16 percent, 

respectively, compared to appreciation of 28 percent for the S&P 500. Potential concerns about 

inflationary pressures, the economic environment, natural catastrophe losses, and the interest rate 

environment weighed on both sectors.

Figure 40: Insurance Industry Stock Price vs. S&P 500

Source: S&P Global

The price-to-book value multiple, which compares on a per share basis the market value of a 

firm to its book value (i.e., reported stockholders’ equity on its balance sheet), is a popular metric 

by which to measure valuation. If a share of an insurer’s stock is selling for less than its book 

value per share, the market is valuing the firm at less than its assets minus its liabilities (net 

worth); the opposite is true if the stock is trading at a premium to its book value. Figure 41

 -

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Dec-11

Jun-12

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Jun-20

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Jun-21

Dec-21

Stock Price

Month and Year

SNL U.S. Insurance L&H SNL U.S. Insurance P&C S&P 500
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compares L&H and P&C sector price-to-book value ratios from year-end 2011 through year-end 

2021. At the end of 2021, the index of stocks of L&H insurers slipped to a discount at 0.92 

times its book value from 1.01 times at the end of 2020, while the index of stocks of P&C 

insurers retained its historical premium at 1.49 times book value, slightly higher than in 2020.

Figure 41: Insurer Price/Book Value Ratios

Source: S&P Global

Domestic Outlook

Full year 2022 insurance industry results will be reviewed by FIO in next year’s Annual Report 

on the Insurance Industry. In the meantime, while financial results reported by insurers through 

the first half of 2022 (the most recently available data) do not determine the outcome for the rest 

of 2022, they do suggest that the outlook for the U.S. insurance industry may continue to be 

hampered to an extent in the near- and medium-term by market pressures brought on by 

economic uncertainty and ongoing pandemic-related impacts. After operating in an environment 

of historically low interest rates during the last 10 years, the insurance industry is now faced with 

managing risk exposures arising from mounting inflationary pressures, monetary tightening, and 

1.22 

1.14 

0.82 0.81 

1.27 1.08 1.03 

0.99 

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1.01 

0.92 1.09 1.13 

1.13 1.12 

1.37 1.36 1.35 1.37 

1.53 

1.39 

1.49 

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Ratio

Month and Year

SNL U.S. Insurance L&H SNL U.S. Insurance P&C
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59 

economic uncertainty—all of which carry potentially challenging implications for insurers’ 

product lines and investment portfolios.95

In the first half of the year, the L&H sector reported a near 30 percent reduction in pre-tax 

operating income, due in part to reserve strengthening and declining premiums. Potential 

balance sheet strains also began to emerge as capital and surplus remained relatively flat from 

year-end 2021. Moreover, growth in affiliated holdings and alternative investments at the end of 

the second quarter continued to increasingly support L&H capital and surplus. For the P&C 

sector, underwriting performance deteriorated with a $4.8 billion net loss through the first half of 

2022 compared to a net underwriting gain of $7 billion through the same period of 2021. 

Furthermore, a substantial increase in net unrealized capital losses was primarily responsible for

an 8.4 percent decline in P&C policyholder surplus, leading to some potential leverage stresses 

when viewing the pace of premium growth relative to that of surplus. Finally, a considerable 

reduction in cash and short-term investments resulted in a ratio of cash and short-term 

investments to liabilities of 7.1 percent at the end of the second quarter, down from 10.7 percent 

at year-end 2021. 

While the P&C sector reported improved premium growth of over nine percent for the first half 

of 2022 compared to the prior year-to-date, net premiums and considerations declined for the 

L&H sector. For the L&H sector, the pandemic had highlighted the need for individuals to 

address end-of-life financial planning, an area that was a boon to life insurers in 2021 but may 

become less relevant as pandemic concerns recede further. Though some positive trends are 

expected in the near-term for the industry—lower COVID mortality and morbidity rates, positive 

pricing momentum for some business lines, and higher returns with rising yields—it remains to 

be seen whether premium growth will be sustained over the medium term.

Rising interest rates have implications for both the L&H sector—particularly with respect to 

annuities—and for the P&C sector’s financial performance. Rising rates could make fixed and 

variable annuity products more appealing, boosting their sales in the near-term.96 Continued 

product innovation and demographic shifts that increase the share of the population that is aging 

and seeking less market volatility may further contribute to the growth of annuity products. In 

the P&C sector, despite a measure of relief for insurers as likely premium rate increases hit their 

balance sheets, inflationary pressures will continue to adversely affect the performance of the 

private auto business line as repair and replacement claim costs continue to increase. Similarly, 

worsening climate-related events, when combined with inflationary pressures, suggest that 

homes may require more dwelling coverage to pay for rebuilding expenses. Therefore, 

homeowner insurance rates may increase in order to be aligned with potential increased future 

95 Monetary tightening in the United States is a course of action undertaken by the Federal Reserve to slow down 

excessive economic growth or curb inflation when prices are rising too fast. The three key tools employed by the 

Federal Reserve to achieve monetary tightening are raising the discount rate, increasing bank reserve requirements, 

and engaging in open market bond purchases.

96 Fixed annuities, which are insurance contracts that pay out specific, guaranteed rates, are most directly affected by 

interest rate changes. As rates rise, investors can seek out products offering a better payout for the same premium. 

Finally, variable and fixed-indexed annuities are more closely linked to equity markets. If equity markets decrease

with rising rates, their performances will suffer, reducing sales and possibly increasing surrenders. 
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FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

60 

costs. If inflationary pressures persists, profitability and reserve strength will also likely weaken 

in longer-tail P&C lines, such as workers’ compensation and medical professional liability. The 

increased length of payouts and uncertainty over future claims in longer tail liabilities expose 

P&C insurers to greater risk of underestimating the cost of such claims and, in a potential 

inflationary environment, these impacts can be exacerbated.

Even as yields on traditional investments rise, both L&H and P&C insurers are likely to continue 

restructuring their investment portfolios away from traditional holdings in exchange for better 

returns, escalating the growth of alternative and non-traditional asset holdings that was triggered 

by the prolonged low interest environment.97 Rising interest rates will generate higher 

reinvestment rates and wider interest margins, benefiting the industry and easing pressures to 

deploy funds into higher-yielding (and riskier) investments. To benefit from the illiquidity 

premium, however, insurers are likely to continue to increase investment allocations to asset 

classes that have a growth component—such as equities, real estate, and private equity—and 

floating-rate securities such as CLOs. These asset classes typically perform better than fixedincome investments in a rising rate environment and can be viewed as appropriate inflation 

hedges.98

In general, the pace at which interest rates rise and the duration of the potential inflationary 

period will be significant considerations in the outlook for the insurance industry. Steep rate 

increases may cause market volatility, while slow and persistent increases could allow insurers 

more time for balance sheet adjustments. A measured rise in interest rates would tend to benefit 

life insurers by easing spread compression in spread-dependent business and by giving them time 

to adjust their crediting rates (reserving and pricing assumptions) with market movements, which 

would enable better asset and liability matching. On the other hand, a spike in interest rates 

could cause certain policyholders to surrender their policies in exchange for new policies with 

higher crediting rates or for other financial products. At the same time, life insurers’ investment 

portfolios likely would report unrealized losses. For P&C insurers, it is uncertain whether 

current pricing and reserving would be able to keep pace in an extended inflationary period. 

Unexpected claims trends and increased medical care, litigation, and construction and repair

costs, could result in higher incurred loss ratios and weakened profitability. P&C insurers that 

hold a relatively higher proportion of longer tail casualty reserves are more exposed to reserve 

volatility in a period of higher inflationary pressures. FIO will continue to monitor these market 

developments and their effects on the U.S. insurance sector.

Capital Markets Activity 

Financings

The U.S. insurance industry continued to access the capital markets throughout 2021. During the 

year, 16 insurer-related public equity offerings were completed, with an aggregate value of $4.4 

97 See Section II.A.2.b and Section II.A.3.b. 

98 In higher inflation scenarios, returns for most fixed income assets decrease and can turn negative, resulting in 

unrealized losses.
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61 

billion.99 This is about the same number of deals as in 2020 (17), but the aggregate value of the 

2021 activity level was somewhat lower compared to 2020 ($5.5 billion). Of the offerings in 

2021, three transactions—valued at $2.3 billion—were initial public offerings (IPOs), marking 

one less transaction, but a significant increase in aggregate value from the four IPOs valued at 

$1.3 billion in 2020. The largest IPO was the $1.4 billion raised by Oscar Health, Inc., while the 

largest follow-on offering was $462 million raised by HealthEquity, Inc. 

Unlike 2020, few InsurTech companies in the United States engaged in raising public equity 

capital in 2021.100 No U.S. InsurTech companies had IPOs in 2021, and only one InsurTech 

company sold a follow-on offering. 

Debt markets continued to be the preferred source of additional capital for insurers in 2021. 

During the year, U.S. insurers raised an aggregate $79.3 billion in 145 separate debt offerings.101 

The value of debt issuance decreased by 14 percent from the $92.7 billion raised in 164 offerings 

in 2020. The largest single debt offering was a $2.2 billion issue sold by Centene Corp. 

However, New York Life Insurance Company was the largest issuer of debt, selling $8.3 billion 

in 17 separate offerings across 2021. UnitedHealth Group, Inc., which sold $7.0 billion in five

separate offerings, was the second-largest issuer of debt in 2021. In the aggregate, the funds 

raised by the top five issuers of debt accounted for 39 percent of the 2021 industry total, down 

from 52 percent for the top five debt issuers in 2020, as more individual companies took 

advantage that year of what were still low interest rates. 

Mergers & Acquisitions of U.S. Insurers

In 2021, there were 67 merger and acquisition (M&A) transactions announced involving U.S. 

insurance underwriters, with a total value of $46.5 billion.102 The number of deals was slightly 

more than the 65 transactions in 2020, but the aggregate value of the 2021 deals was much 

greater than the $17.6 billion aggregate value total in 2020. The L&H sector saw 24 deals in 

2021, with continued interest from private equity firms, and an aggregate value of $24.5 billion. 

Notable transactions included Blackstone Group’s $2.8 billion acquisition of Allstate Corp.’s life 

insurance unit, and its acquisition of a 9.9 percent equity stake in American International 

99 All data in this section with respect to financings is sourced from S&P Global, as collected and calculated by FIO. 

The data include Bermuda-based holding companies for which primary insurance underwriting subsidiaries are 

domiciled in the United States.

100 Compare FIO, 2021 Annual Report, 46 (noting 2020 IPOs were primarily by InsurTech companies and included 

$724 million raised by Root, Inc., and $367 million raised by Lemonade, Inc.). FIO defines “InsurTech” as the 

innovative use of technology in connection with insurance. For more on the rise of InsurTech, see, e.g., FIO, 

Annual Report on the Insurance Industry (2019), 75-98, 

https://home.treasury.gov/system/files/311/2019_FIO_Annual_Report.pdf. 

101 Foreign currency-denominated transactions converted to U.S. dollars by S&P Global.

102 Mark Purowitz, et. al., 2022 Insurance M&A Outlook: Riding the Wave (December 13, 2021), 

https://www2.deloitte.com/us/en/pages/financial-services/articles/insurance-m-and-a-outlook.html. All data in this 

section with respect to merger and acquisition transactions is sourced from Deloitte. Transactions were announced 

between January 1, 2021 and December 31, 2021, and were either completed during the year or remained pending at 

the end of 2021. Transactions include acquisitions of whole companies, assets, or minority interests in instances 

where a U.S-domiciled insurer was either the buyer or seller.
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62 

Group’s life and retirement business for $2.2 billion. The P&C sector had 43 deals with an 

aggregate value of $22 billion in 2021, compared to 52 deals with an aggregate value of $10.3 

billion in 2020. The largest P&C transaction in 2021 was Liberty Mutual’s acquisition of State 

Auto Group valued at $1 billion. 

Alternative Risk Transfer Insurance Products

Alternative risk transfer markets increase the capacity for reinsurance and retrocession, and 

thereby increase the U.S. insurance industry’s ability to supply insurance by using the capital and 

derivatives markets to attract investors from outside the insurance industry. Alternative risk 

transfer instruments include catastrophe bonds (“cat bonds”), collateralized reinsurance, industry 

loss warranties, reinsurance sidecars, longevity swaps, catastrophe futures, and other insurancelinked securities (ILS).103 The assets under management in the alternative risk transfer market at 

year-end 2021 were approximately $97 billion, an approximately $3 billion increase over 

2020.104 Overall annual cat bond and ILS issuances in 2021 set a new annual record, at just 

under $20.3 billion.105

International Insurance Marketplace Overview and Outlook

At year-end 2021, the United States remains the world’s largest single-country insurance market, 

with a 40 percent market share of global direct premiums written (see Figure 42).106 This market 

share decreased by approximately 0.4 percent compared to 2020 and is nearly identical to that of 

2019. When viewed as a single market, the combined share of the European Union (no longer 

inclusive of the United Kingdom) of global direct premiums written (19 percent) is the next 

largest. China remained the second-largest single-country insurance market, with 10 percent of 

global direct premiums written for 2021. Globally, direct premiums written increased by nine 

percent (in nominal terms, unadjusted for inflation) in 2021, led by strong growth—up nearly 10 

percent nominally—in life insurance premiums.107 Nominal growth in global non-life premiums 

103 Although often called ILS, these financial instruments are not all securities within the meaning of the Securities 

Act of 1933. For more detailed descriptions of ILS and other ART instruments, see FIO, 2018 Annual Report. 

104 See, e.g., Aon, ILS Annual Report 2021 (2021), 34, 

https://www.aon.com/reinsurance/thoughtleadership/default/ils-annual-report-2021. 

105 Artemis, Q4 2021 Catastrophe Bond & ILS Market Report (2022), 3, https://www.artemis.bm/wpcontent/uploads/2022/01/catastrophe-bond-ils-market-report-q4-

2021.pdf?utm_source=ReportsPage&utm_medium=Link&utm_content=Q42021Report&utm_campaign=Report. 

106 Fernando Casanova Aizpun, et al., sigma 4/2022: World Insurance: Inflation Risks Front and Centre (July 13, 

2021), https://www.swissre.com/institute/research/sigma-research/sigma-2022-04.html. Swiss Re sigma examines 

insurance and macroeconomic data from 147 countries sourced through Swiss Re Institute. Swiss Re sigma 

separates the insurance industry into “life” and “non-life” sectors according to standard European Union and OECD 

conventions; under these conventions, the “non-life” sector includes health insurance. Beginning with 2019, data 

retrospectively include A&H business written by health insurers in the United States to align with practice in other 

regions. In 2019, premiums from this line of business were $912 billion. Because of this change in methodology, 

market shares from prior years are not comparable. Figures shown for 2019-2021 have been adjusted for this 

change.

107 See Aizpun, sigma 4/2022, 14.
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63 

was somewhat less, at just over eight percent, while global GDP expanded by an estimated 10.7 

percent (in nominal terms) in 2021.108

Figure 42: World Market Share 2019–2021 for Top Twenty Markets

2021 

Rank Country

2019 

Premium 

Volume ($ 

millions)

2019 

World 

Market 

Share 

(%)

2020 

Premium 

Volume ($ 

millions)

2020 

World 

Market 

Share 

(%)

2021 

Premium 

Volume ($ 

millions)

2021 

World 

Market 

Share 

(%)

2021/2020 

Premium 

Volume 

Change (%)

1 United States 2,485,326 39.5% 2,515,358 40.0% 2,718,699 39.6% 8.1%

2 PR China 617,399 9.8% 655,865 10.4% 696,128 10.1% 6.1%

3 Japan 427,580 6.8% 414,475 6.6% 403,592 5.9% (2.6%)

4

United 

Kingdom 364,352 5.8% 341,950 5.4% 399,142 5.8% 16.7%

5 France 260,457 4.1% 238,998 3.8% 296,380 4.3% 24.0%

6 Germany 249,207 4.0% 260,322 4.1% 275,779 4.0% 5.9%

7 South Korea 179,018 2.8% 190,085 3.0% 193,008 2.8% 1.5%

8 Italy 167,881 2.7% 172,704 2.7% 192,481 2.8% 11.5%

9 Canada 134,339 2.1% 139,243 2.2% 161,289 2.4% 15.8%

10 India 107,893 1.7% 111,911 1.8% 126,974 1.9% 13.5%

11 Taiwan 117,823 1.9% 113,304 1.8% 113,423 1.7% 0.1%

12 Netherlands 84,179 1.3% 88,004 1.4% 92,986 1.4% 5.7%

13 Spain 70,982 1.1% 67,220 1.1% 73,571 1.1% 9.4%

14 Australia 68,688 1.1% 62,825 1.0% 72,576 1.1% 15.5%

15 Hong Kong 70,696 1.1% 72,940 1.2% 72,227 1.1% (1.0%)

16 Ireland 58,645 0.9% 49,282 0.8% 64,696 0.9% 31.3%

17 Brazil 73,388 1.2% 57,900 0.9% 62,082 0.9% 7.2%

18 Switzerland 58,868 0.9% 57,081 0.9% 57,793 0.8% 1.2%

19 South Africa 46,421 0.7% 41,110 0.7% 51,215 0.7% 24.6%

20 Luxembourg 41,237 0.7% 36,902 0.6% 48,287 0.7% 30.9%

World 6,284,360 6,291,834 6,860,598 9.0%

Source: Swiss Re sigma, World Insurance.

Unlike the past several years, premium growth in advanced markets outpaced growth in 

emerging markets across the board, which was largely caused by stronger rebounds from the 

economic effects of the COVID-19 pandemic in advanced markets. World life premiums, in real 

terms, grew by 4.5 percent, mainly due to a 5.4 percent increase for this business in advanced 

108 Aizpun, sigma 4/2022, 6; IMF, World Economic Outlook (July 2022), 

https://www.imf.org/en/Publications/WEO/Issues/2022/07/26/world-economic-outlook-update-july2022#Overview. The International Monetary Fund reported a world consumer price increase of 4.7 percent in 2021, 

which when added to the 6.0 percent real growth in world premiums produces an estimated 10.7 percent nominal 

growth rate.
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64 

economies, while emerging markets managed a 1.5 percent increase in life premiums.109 On the 

non-life side, world premium growth of 2.6 percent in real terms was likewise stronger in 

advanced markets (up 2.9 percent in real terms) than in emerging markets (up 1.5 percent in real 

terms). China experienced a slight decline in life premiums due to weakness in the life savings 

business and declines in critical illness business; China’s non-life premiums also declined by a 

slight one percent due to strong competition and rate reductions in auto insurance.110

Most insurance indices in major insurance markets recorded positive results in 2021 and, except 

for the Dow Jones U.S. Life Insurance Index, underperformed their respective broader 

benchmarks—in most instances by a wide range. Among the indices FIO tracked (see Figure 

43), the Dow Jones U.S. Life Insurance Index was the best performing, increasing by roughly 33 

percent in 2021 (compared to a 27 percent gain for the S&P 500). According to one analyst, this 

outperformance by U.S. L&H equities likely reflects the contributions of strong investment 

portfolio returns and risk-shifting through private equity-backed reinsurers.111 The SNL U.S. 

Insurance Life & Health Index did not perform as well as the Dow Jones U.S. Life Insurance 

Index, as it is a broader-based index with a greater population of smaller companies (see Section 

II.A.4). The S&P Europe BMI Insurance Index eked out a two percent gain as inflationary 

pressures and fears rose, suggesting higher claims costs and reduced savings by life insurance 

policyholders.112 Chinese insurer equities, which declined 34 percent as measured by the S&P 

China BMI Insurance Index, were held back by weak financial results as noted above. 

109 Aizpun, sigma 4/2022, 24.

110 Aizpun, sigma 4/2022, 14.

111 Telis Demos, “There May Be Life Left in Life-Insurance Stocks,” The Wall Street Journal, January 5, 2022, 

https://www.wsj.com/articles/there-may-be-life-left-in-life-insurance-stocks-11641385802. 

112 Insurance Europe, European Insurance: Preliminary Figures 2021 (July 2022), 5, 

https://www.insuranceeurope.eu/publications/2674/european-insurance-preliminary-figures2021/download/Preliminary+figures%202021.pdf. 
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FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

65 

Figure 43: Performance of Global Insurance Indices

as Compared to Broader Market Average (S&P 500)

Source: S&P Global

For the near future, slowing of global economic growth and inflation risks are the primary 

concerns for the world insurance marketplace. Slowing economic activity generally leads to 

lower demand for insurance products, while the impact of inflation is generally reflected in rising 

claims costs. Nonetheless, observers expect that total world premiums growth (in nominal 

terms) is likely to continue in 2022, although at a reduced rate, and with much or all of any real 

gains eroded by inflation.113 Similarly, non-life insurance profits will likely be pressured by 

inflationary claims costs, somewhat offset by improving investment yields.114 Risks from 

climate change and natural catastrophes will also weigh on non-life insurers’ profitability.115 

Life insurers may benefit from increased demand for protection products in the wake of the 

COVID-19 pandemic, but growth in the much larger savings product premiums may be held 

back by market volatility and decreased demand.116 Insurers in both sectors will likely be 

impacted by costs of necessary technology investments to update core systems and further 

implement technologies deployed on an emergency basis to address pandemic-related issues, 

among other concerns.117

113 Aizpun, sigma 4/2022, 2.

114 Aizpun, sigma 4/2022, 2.

115 Gary Shaw, 2022 Insurance Industry Outlook (December 2021), 11, 

https://www2.deloitte.com/content/dam/Deloitte/cn/Documents/financial-services/deloitte-cn-fs-insurance-outlooken-220214.pdf. 

116 Aizpun, sigma 4/2022, 2.

117 Shaw, 2022 Insurance Industry Outlook, 17.

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12/31/2020 2/16/2021 3/30/2021 5/12/2021 6/24/2021 8/6/2021 9/20/2021 11/1/2021 12/14/2021

S&P 500 Dow Jones Life Insurance Index

S&P China BMI Insurance Index S&P Europe BMI Insurance Index
Annual Report on the Insurance Industry (September 2022)

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FEDERAL INSURANCE OFFICE, U.S. DEPARTMENT OF THE TREASURY

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III. CONCLUSION

In the coming year, FIO will continue to monitor macroeconomic developments and assess their 

financial implications for the U.S. insurance industry, including the affordability and availability 

of insurance products for traditionally underserved communities and consumers (particularly 

with respect to personal auto insurance and homeowners’ insurance). Among other things, FIO 

will also continue to monitor the role of the insurance industry in helping to improve our nation’s 

cybersecurity, climate-related financial risks, and other relevant domestic and international

developments affecting the U.S. insurance industry, policyholders, and consumers.