Prediction of return to hard market in U.S. is “premature,” Fitch reports

Although a competitive pricing environment is expected to abate somewhat because of the recent decline in market capacity, “it is premature to predict a shift to a hardening market, outside of a few hard hit market subsegments,” says a recent report by Fitch Ratings on the U.S. property and casualty industry posted by Fitch Ratings.
The Fitch Review and Outlook 2008-2009 includes one section entitled “Market Pricing – Where’s the Bottom?” It notes that “projecting pricing trends in the current uncertain environment is difficult.”
“Several recent events, including the large loss of capital tied to investment losses in 2008, the impact of recent above-average catastrophe losses and the potential shifts in AIG’s capacity and underwriting portfolio as the firm strives to pay its government borrowings will have a material impact on the competitive environment going forward.”
Nevertheless, Fitch says it believes rates will stabilize in 2009.
This will happen “outside of segments that have incurred large claims growth such as property/catastrophe (re)insurance markets and professional liability coverage for financial institutions, which will likely see rate increases,” Fitch reports. “Any positive shift in market premium rates that materializes will take some time to flow through reported financial results, so improvement in underlying underwriting performance is unlikely in 2009.”