Outlook Bullish On Euro P-C Carriers

Standard & Poor's said it is maintaining a positive outlook on European property-casualty insurers who have made strong underwriting profits.

Losses from Hurricanes Katrina and Rita will be modest, although there will be some medium-term consequences, the agency said.

Hurricane Katrina has led S&P to put Swiss Re, Lloyd's and Aspen on credit watch with negative implications. "However, based on current information, other European insurance ratings look likely to be unaffected by Katrina and Rita-related losses," according to the report issued Monday.

In addition, harder pricing will help the property-casualty sector protect margins in an increasingly competitive market, the report added.

S&P credit analyst Hans Wright said the storms will force carriers to reevaluate their net retentions, limits and reinstatement positions in relation to catastrophes. "We expect overall reinsurance capacity to be tighter in 2006, at the same time as primary insurers are seeking to increase protections," Mr. Wright said.

Despite the overall trend, signs of weaker pricing for the property-casualty sector exist in several European markets, notably personal auto in the U.K., Germany and the Netherlands, S&P said.

"In general, the industry does seem to have maintained rates in a more disciplined fashion than in previous cycles. New risk management systems are being integrated into underwriting decision-making, and could lead to more rational pricing," Mr. Wright commented.

Other European groups with significant exposure to U.S. catastrophe risks are Munich Re, Hannover Re, Zurich Financial Services and Allianz, S&P found. "Based on current information, Standard and Poor's does not believe Katrina-related losses will affect those ratings," the report said.