The rating agency has maintained its stable outlook on the US P&C insurance and reinsurance sectors, but previously revised its outlook for the underlying fundamentals of the P&C insurance sector to negative.
The downgrade was due to increased concerns over the COVID-19 pandemic and its related impacts on insurers’ performance and credit quality.
“Claims experience relating to coronavirus and related economic disruption is not anticipated to significantly increase loss ratios in the near term, but as the duration and severity of the crisis lengthens uncertainty regarding future sources of underwriting losses expands,” said Jim Auden, Managing Director, Fitch Ratings.
Fitch believes that claims will be significant in specialty segments, including event cancellation and accident & health lines, particularly is legislation passes to eliminate the exclusion of pandemic and the need for physical damage in business interruption claims.
Liability claims in several lines are also likely to emerge, but the extent of losses is difficult to project until the crisis subsides.
Looking ahead, the global coronavirus pandemic adds major uncertainty to the US economy and financial services sector.
Analysts noted that a move towards an economic recession could alter premium growth trends through declines in insured exposures or renewed competitive pressure that restricts pricing momentum.
This could weigh against the improvements in operating performance that P&C insurers reported across 2019, Fitch added.
“A decline in reported catastrophe losses, along with a hardening pricing environment across nearly all commercial lines, led to an improvement in calendar-year underwriting results in 2019,” said Christopher Grimes, Director, Fitch Ratings.