Morgan Stanley: P-C Rates Have Peaked
By Michael Ha
NU Online News Service, July 9, 3:56 p.m. EDT?Pricing for property-casualty insurance has peaked in most lines, and is declining modestly in others, namely property, said Vinay Saqi, insurance analyst for Morgan Stanley in New York.
"However, rates are not falling off significantly–the decline in property rates has been modest," said Mr. Saqi in his research note published this week.
One contributing factor for this development can be found in recent trends in the capital markets, Mr. Saqi explained. "Over the past quarter, equity markets have turned and capital raising has accelerated. Some $15 billion was raised in the past 90 days, much of it in Europe–the most since the 2001 fourth quarter," he said.
He noted that many have argued this trend is not enough to hurt the cycle but said, "We don't disagree, but on the margin, it prevents rates from rising as much as they might otherwise."
Mr. Saqi also said that while the amount that has been raised is an issue, "the greater concern" is how easily "capital constrained" players have raised money.
"As long as some of these players are given a lifeline, it could affect pricing and the reallocation of share," he said. "We believe there will be more capital coming to market over the next six to 12 months."
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