S&P Reports P/C Insurers to Have Profitable 2007, Less Confident About ’08
According to a report issued on Wednesdary by Standard & Poor's Corp (S&P), U.S. commercial property/casualty insurers should enjoy another very profitable year in 2007, bearing in mind that there are no last-minute setback.
Warnings for commercial lines companies will approach the record level achieved in 2006, according to S&P's report “2008 U.S. Commercial Lines Outlook: Earnings Still Strong, But Weaker Prices Should Start To Hit Bottom Lines."
“Balance-sheet strength for most insurers, driven by higher statutory surplus and diminished concerns about reserve adequacy, will also continue to improve,” said S&P. But the continuing soft market is cause for concern, said S&P.
“As 2007 has progressed, we have noted with increasing concern the rate deterioration across virtually all business lines. Although the absolute level of rate decline varies substantially by source—with insurance intermediaries suggesting higher average rate declines than are the insurers themselves or insurance buyers—one thing they do agree on is that the rate of deterioration is accelerating. Although companies are still reporting strong underwriting results, in large part because of another exceptionally low year for hurricane losses and the decline in adverse prior-year reserve development, we believe that the margin compression on business written in 2007 will become more evident in 2008.”
S&P said it is maintaining its stable outlook on the U.S. commercial lines sector, expecting “the number of upgrades and downgrades over the next six to 12 months to be fairly balanced.”
However, S&P added that “we are less confident going into 2008 than we were going into 2007 that the property/casualty industry will be able to break out of its historical underwriting cycle of vigorous price competition during soft market periods and engineer a soft landing.”
Published on November 29, 2007
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