P&C profitability anticipated for 2006, but decline expected through 2008

The Property & Casualty insurance industry can look forward to another year of overall industry underwriting profit in 2006, which a Conning Research and Consulting Inc. forecast report says will match the results of 2004.
“Analysis of 2005 results for the industry shows a remarkable consistency in profitability by line of business, aside from the effects of catastrophes,” Stephan Christiansen, director of research at Conning Research & Consulting, Inc, says. “Profitability continues through 2006, but slowing premium growth, rising loss costs and accumulating surplus will take their toll and the industry will again show combined ratios above 100% in 2007 and 2008.”
The Conning Research study, “Property-Casualty Forecast & Analysis by Line of Insurance, 2005-2008” reports on 2005 preliminary results for the industry and forecasts results for the P&C industry and its top lines of business through 2008, providing a first look at results through 2008.
“Our study identifies several conditions that are clouding our 2006-2008 forecasts,” Christiansen says. “Market conditions are becoming more price-competitive outside of catastrophe-prone areas, but with some volatility. This is stimulated by surplus accumulation, strong loss reserves and strong cash flow. The projection also reflects an expectation for heightened catastrophe losses, but below the levels seen in 2004 and 2005. Increased pricing for coastal exposures, and higher costs and reduced availability of reinsurance are helping to moderate these premium trends through 2008. Overall, we expect ROEs will slowly subside, falling from 9.2% in 2005 to 7% by 2008.”