NU Online News Service, Jan. 24, 1:34 p.m.EST

The good news for property and casualty insurers is that 2012should see positive rate momentum. The bad news is thatinsured-exposure growth will not likely be a contributing factor topremium growth, according to a Keefe, Bruyette & Woodsanalysis.

In its report, “Premiums in 2012: Don't Look at Insured ExposureGrowth for Much Help,” KBW says, “In 2012, we expect industrypremium growth to approach the mid-single-digit range due primarilyto positive rate momentum. We do not expect insured-exposure growthto contribute much to the premium base as economic fundamentalsremain weak.”

In particular, KBW says it remains cautions on thepremium-growth prospects for insurers that write business “heavilydependent on the economy, such as monoline workers' compensationwriters, or more competitive lines of business, such as personalinsurance.

KBW also says the “haves” should separate from the “have-nots”in 2012, with some franchises positioned to take market share fromothers through profitable organic-growth opportunities.

The report breaks out certain lines of insurance and discussespremium-growth prospects in those lines. For private-passengerauto, which made up 35 percent of direct premiums written in 2010,and commercial auto, which represented an additional 5 percent in2010, KBW says fewer automobiles are being insured today.

“We would not expect such trends to change dramatically in thenear term, even in the context of improving economic-news flow,”KBW says.

For homeowners insurance, which made up 15 percent of directpremiums written in 2010, KBW says fewer homes are being insuredtoday, and housing-market fundamentals remain weak. “One glimmer ofhope,” KBW says, “is that home prices in select markets havestabilized, following the steep declines of 2008.”

For workers' compensation, which made up 8 percent of theindustry's premium volume in 2010, KBW says payrolls remain “wellbelow peak levels,” although they are bouncing back from lows seenin 2009 and 2010.

The report states, “While payrolls have stabilized andaudit-return premiums have been declining, an indicator thatinsurers now have a better grasp on current payroll levels, we donot expect significant near-term improvement in employment trendscapable of substantial exposure growth (higher payrolls).”

Despite the bleak outlook for these lines, KBW says ratemomentum in these lines will offer premium-growth opportunities.However, the firm adds that it expects loss-cost trends to “closelyfollow rate increases, resulting in little improvement inunderwriting results.”