National Underwriter - September 5, 2011

Price Increases No Sure Bet
In Spite Of Poor First-Half Results

BY MARK E. RUQUET

THEINSURANCEINDUSTRYperformed poorly for the first half of this year, primarily due to an unprecedented level of catastrophes, and while the results may point to premium-price increases, other factors may keep a lid on them.

Fitch Ratings, Alirt Insurance Research and Keefe, Bruyette & Woods released reports noting the first-half struggles for the insurance industry.

Fitch’s report on catastrophe losses impacting U.S. P&C insurers says the combined ratio of 48 publicly held insurers and reinsurers deteriorated to 108.5 from 97.2 for the same period last year. The results were blamed on both the level of catastrophe losses and “broadly inadequate pricing.” In Alirt’s analysis of the 50 largest U.S. insurers, excluding reinsurers, the firm says the combined ratio jumped to 109.6 for the first six months of this year, up from 102.6 for the year 2010.

In its universe of 49 companies it ana-
lyzes, KBW says that, excluding catastro-
phe losses and reserve development, the
group reports an accident-year combined
ratio of 97.3 for the 2011 first half, com-
pared to 93.9 for the same period in 2010.

significant price increases in response to recent losses,” the rating agency says.

But while some commercial markets are showing increased signs of “price stability,” a return to a broad P&C hard market is “unlikely given current-market capital levels and competitive dynamics,” says Fitch.

KBW says there are
pockets of “pricing
strength,” but the indus-
try “is teetering and wait-
ing for that one ‘event’ to
push the industry into action.”
At least one positive mentioned from a
carrier standpoint is the growth in premi-
ums written.

KBW notes that premium levels rose
4 percent on a year-over-year basis, “re-
flecting a stabilizing economy.” However,
premium growth is expected to remain
“muted” from the combination of a weak
economy, high unemployment and lack
of widespread rate hardening. NU
Personal Lines Appear Stable Despite Weather Woes

BY PHIL GUSMAN

PERSONAL-LINES insurers’ capital strength and core-underwriting earnings power should offset challenges posed by natural catastrophes; high-frequency, low-severity weather events; and the “very competitive nature of the market,” according to Moody’s Investors Service.

As such, in its August 2011 Industry Outlook, Moody’s says it is maintaining its stable outlook on the U.S. personal-lines industry.

While the general macroeconomic
trends, such as high unemployment
and a slow housing-market recovery, are
impacting new-business growth, Moody’s
notes that personal lines are, relative to
commercial lines, insulated from these
trends. “Coverage for personal auto
and homeowners’ insurance is typically
mandatory, and customers generally
continue to pay policy premiums during
periods of financial distress.”
For auto insurers, Moody’s says it
expects usage-based insurance to gain
momentum and notes that carriers that are
at the forefront of offering such products
will gain a competitive advantage.