The 2014 outlook for the global P&C industry is stablethanks to expected premium growth from the economic recovery andstable-to-rising penetration rates, Moody's Investors Servicesays.

Moody's says it expects premiums to grow at low-to-mid-singledigits in North America and Europe in 2014, and at high-singledigits or double digits in Asia and Latin America.

A key strength for P&C, Moody's notes, is the mandatorynature of major lines, insulating performance from economic-cyclevolatility. Manmade and natural catastrophes remain key challenges,as does pricing and reserving long-tail lines.

In North America, Moody's says rate increases are moderating,“but the cumulative benefit of past increases is still rollingthrough earnings, notably in U.S. commercial-liability lines.”Moody's expects those lines to achieve combined ratio in themid-90s by 2014.

While low-interest rates will continue to hurt investmentincome, Moody's says underwriting discipline is improved in such anenvironment.

Moody's also says it expects reserves to remain slightlyredundant, but with a declining cushion to support earnings.

Meanwhile, Fitch Ratings says the U.S. insurance-brokerindustry also has a stable ratings outlook for 2014, aswell as a positive sector outlook due, again, to economicimprovement as well as a continuing trend of commercial priceincreases, albeit at a slower rate than this past year.

Fitch tracks broker performance through its industry indexconsisting of five publicly traded commercial brokers: Marsh &McLennan Companies, Aon, Willis Group Holdings, Arthur J. Gallagher& Co. and Brown & Brown.

Fitch says, “A continued but moderating trend of pricingimprovement in many commercial-insurance-business classes shouldprovide a tailwind for organic growth at least through the firsthalf of 2014.” Fitch also expects new-business opportunities toarise due to economic improvement as well as—for employee benefitsbrokers and consulting businesses—the evolving U.S. healthcareenvironment.

Fitch expects mergers & acquisitions activity to remainrelatively active due to “the historically low cost of debt andimproved equity valuations of potential buyers” to fund purchasers.Fitch adds that it expects brokers to “continue to supplementmodest organic-growth revenue through selective acquisitions.”

While the ratings agency notes that M&A activity slowed byroughly 9% in 2013 compared to 2012, driven partially by a declinein inventory after the active prior year, Fitch says the 2013second half still saw some larger acquisitions, including HubInternational's agreement to be acquired by private-equity firmHellman & Friedman for $4.4 billion, Arthur J. Gallagher's $277million acquisition of Bollinger and Jardine Lloyd Thompson's $250million acquisition of Towers Watson's reinsurance-brokeragebusiness.

Fitch says its outlook could change if brokers were to see a“material increase in financial leverage and corresponding weakercash-based interest coverage ratios,” if the economy were to dipback into a recession or if pricing was to fall significantly, orif the industry were to experience an unanticipated earningsdecline. On this last point, Fitch says the stable demand forservices provided by brokers makes such a scenariounlikely.