- US Department of the Treasury and the Office of the US Trade Representative announce their intent to sign the Bilateral Agreement between the US and the UK on Prudential Measures Regarding Insurance and Reinsurance (US-UK Covered Agreement)
- Insurance Europe raises serious concerns in its response to a consultation by the European Commission on its draft proposals for the 2018 review of the Solvency II Delegated Regulation
- Insurance Europe seriously concerned by the quick-fix approach taken by the European Supervisory Authorities (ESAs) in their proposals for changes to the Key Information Document (KID) for Packaged Retail Investment and Insurance Products (PRIIPs)
- Commercial insurance prices in the US increased by over 2% in the third quarter of 2018 according to Willis Towers Watson CLIPS survey
- SME attitude to cyber security worrying says Aon after commissioning poll
- Beazley launches cyber and breach response portal that provides exclusive access to a wealth of risk management information and risk mitigation tools to its Beazley Breach Response (BBR) policyholders in the UK, France, Spain and Italy
- Royal London CEO and Chair to stand down expired
- Co-operators selects Guidewire Predictive Analytics for Claims to embed predictive insights into Guidewire ClaimCenter expired
- Willis Towers Watson launches latest version of its innovative Radar software expired
- Coverys to join DTW’s panel of capacity providers as one of its largest backers expired
- Peak Re launches Asia’s first sidecar transaction via a new Bermuda-domiciled special purpose insurer, Lion Rock Re expired
- Ed appoints CEO-designate and is setting up a new broking platform in Bermuda expired
5th December 2018
Fitch says notable rebound by US property and casualty (P/C) insurers this past year leads to revising its fundamental sector outlook to stable from negative
A notable rebound by US property and casualty (P/C) insurers this past year, following a challenging 2017, has led Fitch Ratings to revise its fundamental sector outlook to stable from negative, according to Fitch's 2019 outlook report.
US property/casualty (P/C) industry profitability rebounded in 2018 following a meaningful underwriting loss in 2017, driven by modest improvement in the personal and commercial automobile lines as well as a decline in catastrophe losses relative to the prior year.
Fitch's outlook revision also reflects improvement in market fundamentals in 2018 and stabilizing factors, including solid business profiles, very strong capital adequacy and underwriters' effective risk management processes.Fitch's rating outlook for P/C insurers remains stable as a wide majority of Fitch's coverage universe has Stable Outlooks, indicating ratings are unlikely to change in the next 12-18 months.
The overall combined ratio for 2018 is projected to improve to approximately 99, down from 104 in 2017. Results weakened somewhat in the second half due to catastrophe losses from Hurricanes Florence and Michael, and severe California wildfires. The larger 2017 underwriting losses led to price firming across a broader segment of the market than anticipated, with rates in property and auto lines firming significantly. Pricing in several casualty and liability segments also rose modestly or stabilized in 2018.
"U.S. property/casualty results rebounded in 2018. While profitability is better and pricing trends were more positive in many segments, we would not characterize this as a hard market. Any further performance improvement in the future is in question, given the potential for future price competition and uncertainty in claims trends," said James Auden, managing director at Fitch Ratings.
Net earnings in 2018 benefited from improved underwriting, a return to growth in investment income and benefits from lower corporate tax rates. The industry statutory return on surplus (ROS) is projected at 7.9% in 2018, with a modest decline to 7.2% in 2019. For 2019, Fitch projects another modest underwriting profit, and a slight decline in net earnings from lower investment gains amidst an environment of rising interest rates and uncertain equity markets.
Losses related to insurers' natural catastrophe exposures represent a key source of volatility in near term profitability. While the last two years generated catastrophe related insured losses above historical norms, a period of substantially higher losses remains possible and could have a material impact on company earnings, capital levels, and ratings.
Meaningful unanticipated increases in loss costs are another potential source of future profit deterioration. Key claims cost drivers such as medical costs may outstrip general inflation in the near term. Evidence of rising litigation and tort costs in several segments, including auto liability, professional liability and workers' compensation, could be a sign of higher claims severity.
The P/C industry's statutory capital base continues to expand, and capital adequacy measures remain supportive of ratings. Surplus growth is likely to remain moderate in the future with earnings offset by parent dividend outflows. Capital adequacy measures are anticipated to remain stable in the near term.
"Fitch Ratings 2019 Outlook: U.S. Property/Casualty Insurance " is available at www.fitchratings.com
Fitch Trends(316 articles)