S&P’s maintains negative outlook for personal and commercial lines

Standard & Poor’s (S&P’s) has maintained negative outlooks for both the commercial and personal North American insurance sectors, according to its recent industry report card.
In 2008, net premiums written declined 6% in the commercial sector, but surveys show pricing declines are progressively smaller year-over-year, S&P’s said in Industry Report Card: Outlook Remains Negative for Most North American Insurance Sectors.
“Still, a general upturn in pricing seems to have been slowed by the weak economy and the reluctance of insurance buyers to absorb price increases as they look to cuts their own costs,” the report says.
Although premium volume could decline even in a flat pricing environment, as companies choose to purchase less coverage, S&P’s suggested the pricing trend will continue gradually upward. But the ratings agency is concerned loss cost trends may rise at a faster pace, reducing underwriting profitability.
“Because of these pressures, we have a negative outlook on the U.S. commercial lines property/casualty sector,” the report says.
In personal property/casualty lines, higher catastrophe activity and diminished favourable reserve re-estimates in 2009 Q2 are likely to lead to an increase in the combined ratio, S&P’s says in its report.
“Competition for personal lines business continues to be highly aggressive, and based on second-quarter earnings information pricing remains intense,” S&P’s said.
“In general, reduced vehicle and home sales continue to stunt new business for both auto and homeowners insurance, though customer retention remains at solid levels.”
Although financial results for the 2009 H1 remained relatively sound, volatile weather patterns and inconsistency in the credit markets each caused many insurers to post lower net income compared with the same period a year ago, S&P’s said.
“As a result, our outlook on the U.S. personal lines insurance sector remains negative.”