Tim Zawacki, Senior Insurance Research Analyst at S&P Global Market Intelligence said, "The industry is poised to produce significantly stronger underwriting results in 2018 after a record year for natural catastrophes made 2017 especially challenging. However, the projected improvement in underwriting performance is not limited to an easy comparison. We expect that the industry will build upon the progress it has made in the personal auto business and finally see a turn in commercial auto results after several difficult years. Beyond underwriting income, we expect a lower corporate tax rate and rising interest rates will also prove beneficial to industry profits."

Elevated catastrophe losses led by the first major hurricane to strike Florida in 12 years, Hurricane Irma, triggered nearly 1 million claims. Coupled with hurricanes Harvey and Maria, the industry's combined ratio spiked to 103.5% in 2017 from 100.5% in 2016. It marked the highest such result in six years.

The industry's effective tax rate will decline in 2018 and subsequent years as a result of the reduction in the corporate tax rate to 21% from 35%, which took effect in 2017. One component of tax reform produced a readily quantifiable impact to first-quarter 2018 results: the Base Erosion and Anti-Abuse tax. The tax targets base erosion payments by U.S. companies to related foreign parties, and it may impact reinsurance payments to foreign entities or individuals. In response, several U.S. companies with foreign parents acted to terminate reinsurance agreements, which contributed to growth in their net premiums of 14.4% in the first quarter, the highest rate of growth in any quarter in more than 15 years.

Additional findings from the U.S. Property & Casualty Insurance Market Report include:

• Cyber: Direct premiums written from standalone cybersecurity and identify theft policies as reported on a supplement to annual statements crossed the $1 billion mark in 2017. While that amount likely represents only a fraction of the cyber liability coverage issued globally, it represented year-over-year growth of 7.3%.

• Auto: The private auto business accounted for 36.6% of the industry's overall 2017 direct premiums written and 42.4% of its net incurred losses as the industry continued to suffer from a rise in the frequency and severity of claims that began in 2015. S&P Global Market Intelligence will be publishing an in-depth auto insurance outlook later this year.

• Insurers: P&C insurers delivered their highest first-quarter levels of profitability since 2013. The State Farm group, the P&C industry's biggest player in terms of direct premiums written, produced its best underwriting result in a first quarter in 12 years. Berkshire emerged as the P&C industry's largest writer of accident-and-health business on a net basis as it shifted reinsured long-term care business among subsidiaries. Its $2.35 billion in A&H net premiums written represented year-over-year growth of 241.8%.