The recession will suppress premium exposure growth and prompt a prolonged soft market for most commercial lines through 2010, Conning Research and Consulting predicts.
Indeed, the property and casualty market won't see a turnaround until 2011, Hartford-based Conning said in its latest forecast.
“The combination of continued price decreases in most commercial lines of business and the recession suppressing exposure growth continues a string of negative premium growth for 2009 that began in 2007,” noted Clint Harris, a Conning analyst.
On the positive side for sellers, however, Conning said it now foresees more favorable loss and combined ratio results for the p&c insurance sector.
“Recessionary conditions also can suppress losses, including reduced frequency from fewer exposure units and reduced loss severity due to deflation in some property loss cost drivers,” said Mr. Harris.
Those factors, he added, mean “a trend of moderate deterioration in the combined ratio through 2010 and modest improvement beginning in 2011–excluding unusual catastrophe experience or further turmoil in financial guaranty lines.”
The recovery in 2011 may lead to an increase in both premium and loss exposures, “but also may include the start of acceleration in inflationary factors that drive loss severity,” said Stephan Christiansen, Conning research director.
Conning, he explained, “has seen indications of price-firming in personal lines but continued mixed conditions in commercial lines. Capital conditions remain strong, particularly in commercial lines, and it is likely that further stresses will have to occur before any significant broad-based change in pricing will emerge.”
One of the key drivers for the sector noted by the company is a severely sagging home market and an increase in foreclosures, which Conning said is moving some of the exposure to excess and surplus lines residual market insurance products.
Among the lines examined in the report is personal auto, for which Conning said it projects a combined ratio of 99 in 2009, 97.6 in 2010 and 96.4 in 2011.
Looking at homeowners insurance, Conning said it expects combined ratios above 110 in 2009 through 2011.
The workers' compensation combined ratio will worsen by one point in 2009 and go to 103.3, while 2010 should see it stabilize at 103.2, decreasing in 2011 to 102.6, Conning said.
For the general liability line, the company said it projects premium growth of 2.5 percent in 2010 and 5 percent in 2011.
Conning's “Property-Casualty Forecast & Analysis” can be purchased by calling (888) 707-1177 or by visiting www.conningresearch.com.
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