NU Online News Service, Dec. 8, 3:47 p.m. EST
The 2011 outlook for personal and commercial lines remains stable, according to Fitch Ratings, but a turn to negative is more likely for commercial lines than personal, the rating agency said.
In a recent outlook report, Fitch noted that commercial lines rate inadequacy is more pronounced compared to personal lines. Fitch pointed to rising accident year underwriting losses in key commercial lines segments, as well as competitive forces continuing to drive down rates.
Personal lines, meanwhile, are "exhibiting premium rate increases in many markets and are likely to remain closer to a break-even underwriting result going forward."
For both commercial and personal lines, though, Fitch said, "Given the [property and casualty] industry's historical volatility and current position in the market underwriting cycle, Fitch views a future shift to a positive industry rating outlook as unlikely."
The current stable outlook, Fitch said, is based on the industry's strong capital position and expectations that, while pricing is not expected to improve, it should not return to extreme underpricing. Fitch said it expects the p&c 2011 combined ratio to rise to 103.6 from an anticipated 101.5 in 2010.
Net income is expected to be lower in 2011 compared to the previous two years, "in line with Fitch's view that returns on capital will be mired at mid-single-digit levels for the next several years."
Natural catastrophes remain a "key source of uncertainty" for p&c insurers, Fitch noted. The rating agency said that despite improvements in modeling technology, a large catastrophe in an area that has not experienced recent losses could produce "much larger than anticipated" losses. Such events, Fitch said, include a Northeast hurricane or an earthquake along the New Madrid fault line.
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