A.M. Best Co. rating service said it is increasing its combined ratio loss estimate for the property-casualty industry by close to five points from its projection at the beginning of the year, pushing it over 100.

The Oldwick, N.J.-based firm said its 2008 estimate for the overall industry rises from a just profitable January projection of 98.6 to 103.2. Best said the forecast covers personal lines, commercial lines and the U.S. reinsurance segment.

The increase was prompted by continued price softening, challenging market conditions, unusually high catastrophe losses in the first half of the year, and significant underwriting losses reported by mortgage and financial guaranty insurers, Best said.

First-half catastrophe and storm losses added approximately five points to the industry's combined ratio, while losses linked to mortgage and financial guaranty insurers added an estimated two points.

Other events Best said were affecting the change:

o Net premium written on personal lines is expected to increase only 1 percent and not 1.4 percent as initially forecasted, reflecting slower rate increases on personal line auto. The segment's combined ratio is expected to increase to 102.5 by the end of the year, up from the initial forecast of 99.5. The increase is primarily from catastrophic losses in the Midwest and Gulf Coast.

o Commercial lines net premium written is estimated to decrease approximately 3 percent compared to the initial forecast of a 2.3 percent decrease. Pressure on pricing and losses in the mortgage and financial guaranty insurance side are expected to translate into a combined ratio of 104 compared to the initial projection of 97.5. Losses among mortgage and financial guaranty insurers alone account for a five-point increase.

o U.S. reinsurance segment net premium written will increase 4 percent compared to a reduction of 5 percent. The drivers include increased company growth and conservative underwriting. The combined ratio in this segment is estimated to increase from the initial estimate of 99 to 103 due to the impact of Hurricane Ike and reductions in favorable loss reserves.

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Best Says P-C Sector Combined Ratio To Rise Over 100

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