April 25, 2011 by Canadian Underwriter
The U.S. property and casualty market likely won’t see a quick or severe hardening between 2011 and 2013, but instead will likely see modest, incremental rate increases, according to Conning Research & Consulting.
“The forecast drivers for 2012 and 2013 include an expectation of somewhat more robust economic growth rates than in 2011, and the beginning of some premium rate-firming in commercial lines,” said Conning director of research Stephan Christiansen.
“Personal lines are expected to see continued single-digit rate firming, with some modest growth in exposures as well.”
Conning predicts net premium growth rates of near 5% for both 2012 and 2013. This is “well short of what would be considered a meaningful turn in the underwriting cycle,” Christiansen said.
The forecast is dependent on the pace of the “still-sputtering” economic recovery, he noted. “The turnaround in commercial lines pricing also assumes tailing off of loss reserve releases and a delayed recovery of investment yields, placing additional pressure on operating margins.”
For the near term, in 2011, Conning predicts moderate net premium growth over 2010 of between 3% and 4%, as well as additional deterioration in underwriting results of about two percentage points.
The forecast combined ratio for 2011 is between 102% and 103%, based on a projected average annual natural catastrophe loss of about $19 billion.
“Storm damage in the first half of 2011 has been following the pattern of 2007-10 at above average levels, so much will depend on second-half tropical storm results.”