Personal insurance companies remain stable 2006 (December 12, 2005)

The personal lines sector is expected to remain stable for 2006 despite the losses stemming from 2005’s aggressively violent hurricane season, according to a new report from Standard & Poor’s.
However, the report titled, “2006 Outlook: Personal Lines Insurance Sector Remains Stable Despite Hurricane Losses,” also states that it is likely that the profitability of personal lines companies could be negatively impacted as a result of increasing reinsurance costs and regulators who are reluctant to approve rate increases.
“Personal lines companies will have to enhance their risk management and underwriting practices even more,” Polina Chernyak, S&P’s credit analyst, says, “it’s unlikely that state insurance departments, in the current political environment, will want to approve high rate increases, especially in the affected states.”
Regardless, S&P’s says the market will likely remain strong in 2006 because adequate pricing, prudent underwriting practices and operational efficiencies inherent in the unearned premium reserve at year-end 2005 (excluding catastrophe) will continue to benefit underwriting results in 2006.
S&P’s add that moves over the past few years to improve enterprise risk management and increase the sophistication of its pricing structures will keep results strong.