Fitch: Following Dismal 2011, P/C Insurers Still Face Challenges
March 15 2012 - 9:45AM
Business Wire
Fitch Ratings expects property/casualty insurers to report
improved operating results this year, following a period of heavy
catastrophe-related losses and weak earnings in 2011. However, a
continuation of depressed investment yields and competitive market
conditions will likely delay a recovery to marketwide double-digit
returns on capital.
The deterioration of insurer operating results last year
reflected not only the impact of heavy catastrophe-related losses
(notably the Japan earthquake and numerous inland storms in the
U.S.), but also a continuation of weak P/C market fundamentals.
Catastrophe losses for the 47 major insurers reviewed in 2011
totaled $30.8 billion, which represented more than 11% of earned
premiums. This compares with 5% in 2010, which was also considered
a relatively heavy year for catastrophe losses.
Evidence of broader improvement in insurance premium rates is
mounting, reflected in recent management commentary, as well as
renewal rate information from brokers and other pricing surveys.
Market segments hardest hit by recent large loss events are
experiencing more significant price movements, including property
reinsurance, primary commercial property, and homeowners in
catastrophe-affected areas, as well as workers' compensation, which
has deteriorated into the worst-performing commercial segment.
While recent favorable pricing movement is encouraging for the
industry, questions remain over the sustainability of the trend.
Continued premium growth and a hope for reversion toward average
historical catastrophe loss experience would be supportive of
better profitability in 2012.
We continue to believe that a more meaningful removal of capital
or underwriting capacity is necessary before insurance pricing can
move to levels corresponding with the strong accident year returns
produced in the middle of the last decade.
For a detailed review of P/C insurance operating results in
2011, see Fitch's upcoming report "U.S. Property/Casualty Insurers'
Year-End 2011 Financial Results" at www.fitchratings.com.
Additional information is available on www.fitchratings.com
The above article originally appeared as a post on the Fitch
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