Despite profit deterioration from catastrophe losses in 2005, stronger underwriters will still manage profitability in the near future in the soft market climate, according to a Fitch Ratings report.

Fitch's Chicago office said the U.S. property-casualty insurance industry will report deterioration in profitability in 2005 because insured catastrophe losses reached record levels that year.

The 2005 decrease in profitability is mainly due to the destruction from Hurricane Katrina, the most devastating insured loss event in history, and Hurricanes Rita and Wilma, each of which will rank among the top 10 historical insured loss events, Fitch noted.

Underwriters hardest hit by the hurricane events were reinsurers and personal lines writers with concentrations of business in the Gulf Coast and Florida, Fitch said.

Fitch remarked that the Insurance Services Office's Property Claims Service unit reported that p-c insurers incurred $56.8 billion in catastrophe losses in 2005. This figure is roughly double the previous record of $27.3 billion catastrophe losses paid by insurers in 2004 and the $26.5 billion paid in 2001, which included the terrorist attacks of Sept. 11, 2001.

Fitch said its study reveals that, despite steady rate reductions in many insurance segments over the past two years, market conditions remain supportive of underwriting profitability for stronger underwriters in the near term.

It noted that with January insurance renewals rates have increased dramatically in market segments affected by the 2005 catastrophes, particularly p-c reinsurance.

Fitch said it anticipates that pricing will continue to firm in these areas through the remainder of 2006.

In casualty lines and noncoastal property segments, the events may promote short-term stabilization in rates, but competitive pressure is likely to promote continued rate declines in these segments, Fitch said.

Special Reports /

Fitch Sees Profits Near Term For P-C Insurers

Related Stories

Recommended For You