Fitch Ratings issues forecast on U.S. p&c industry

Property and casualty insurers in the United States are expected to post better underwriting results this year as firmer pricing patterns spread across the industry, notes a new report from Fitch Rating Service.

“Fitch estimates that 2012’s underwriting results will be a material improvement over 2011; however, current returns on capital remain below historical averages,” says Jim Auden, managing director at Fitch. “The year-over-year improvement is derived from several factors, including lower expected catastrophes and pricing increases.”

The rating agency states the current shift in the market cycle represents a stabilizing force that supports insurer rating levels. While market pricing has responded to underwriting losses more slowly than expected, Fitch reports, previous market turns were precipitated by considerably longer and prolonged underwriting losses.

It projects that the industry will break even on underwriting performance and achieve a return on surplus of approximately 7% in 2013. Favourable pricing momentum is likely to continue through year-end 2012. However, ample market underwriting capacity and competitive factors are likely to dampen pricing trends as 2013 unfolds.