2009 underwriting results should be “respectable,” Standard & Poor’s finds

Despite ongoing uncertainty related to the credit and equity markets, the long-term fundamental strength of the U.S. personal lines property/casualty sector remains intact, a Standard & Poor’s article says.
“A continued focus on disciplined underwriting and improved risk management should allow personal lines insurers to produce sustainable long-term operating results,” Standard & Poor’s says in its new report, Outlooks On Most North American Insurance Sectors Negative In 2009.
“Although we do not expect underwriting results in 2009 to be as good as previous years, they should be respectable, assuming a more normal catastrophe year, and outperform those of 2008,” the ratings agency says specifically about the property and casualty segment.
The credit turmoil does have a silver lining, the report adds.
Although “current capital adequacy and liquidity in the aggregate are sufficient to meet the sector’s financial obligations, general economic conditions are forcing companies to pay more attention to credit and liquidity than they may have in the past,” S&P’s says. “We view this as a positive and believe credit, investment and operational risks underscore the importance of having clearly defined risk strategies and tolerances in place.”
U.S. property and casualty companies faced ongoing price declines for commercial lines, substantial second-half catastrophe losses, decreased investment income and very substantial increases in unrealized capital losses in 2008.
“Unfortunately, it doesn’t look like things are going to get much better anytime soon,” S&P’s observes.
“Reflecting our concerns, Standard & Poor’s is maintaining its negative outlook for the U.S. commercial lines property/casualty sector into 2009.”