U.S. property and casualty industry’s combined ratio to climb in 2010: Fitch

FitchRatings expects the U.S. property and casualty industry to experience higher underwriting losses and below average returns on capital in 2010.
The agency’s outlook on the industry remains negative.
The negative rating outlook on the industry implies that downgrade actions are likely to outpace upgrades within the property and casualty sector going into 2010, although the number of downgrades is unlikely to approach the levels reached in 2009.
“The rating outlook continues to reflect lingering uncertainties related to the broader economy and financial market conditions,” says a FitchRatings release.
“Ratings concerns are shifting, however, towards traditional underwriting cycle and competitive pressures as premium rate levels are inadequate across nearly all segments with few signs of positive pricing momentum.”
Inadequate premium rate levels exist across nearly all segments coupled with reductions in insured exposures and demand due to the recession has promoted negative premium growth and a more aggressive stance by insurers to retain existing business, the release says.
“Given these market fundamentals, the industry statutory combined ratio is projected to increase to 104% in 2010 from 101% in 2009,” it continues.
“Industry statutory returns on capital are likely to remain in the mid-single digit range going forward.”
But Fitch does not currently anticipate a return to the extremely competitive pricing of the late 1990s and early 2000s, it adds.