DAILY NEWS Feb 8, 2013 2:14 PM - 0 comments

Competitive market, low investment yields mean negative ratings outlook for U.S. commercial lines: A.M. Best

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The outlook for the property and casualty industry in the United States for this year is generally stable, although the commercial lines segment has retained a negative outlook, says a new special report from rating agency A.M. Best.

NumberLast year was generally uneventful in terms of catastrophes until Oct. 29, when Hurricane Sandy made landfall in New Jersey. Estimates of losses from that storm aren’t yet finalized, but it is on track to be the second costliest hurricane in U.S. history (for insured losses), behind only 2005’s Hurricane Katrina, notes the company’s Review and Preview for the U.S. property and casualty market.

The company says it expects the industry’s 2012 underwriting loss to be slightly higher than the previous year, at around $30.8 billion. Catastrophe-related losses, though, declined slightly, the report suggests. The rating agency says it is expecting a combined ratio of 106.2 points for 2012.

Overall, net premiums written continue to increase for this year, A.M. Best says, and 2013 will also likely see an improved pricing environment, although rate increases will likely be small.

Competitive market conditions and slow economic growth, along with poor investment yield, mean a negative outlook for commercial lines (meaning more negative rating actions are expected than positive), the company says. Pricing for that segment will likely continue to improve though, assuming a major catastrophe doesn’t occur, the report notes.

Volatility from severe weather events will likely have an impact on personal property lines this year, but the auto insurance segment remains stable, the report suggests. It also says that pricing through telematics will continue to grow, as will marketing budgets.

The reinsurance sector also maintains its stable outlook, A.M. Best says. Strong risk-adjusted capitalization and good enterprise risk management practices, along with stable pricing, have allowed for that, the report notes.

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