Like houseguests overstaying their welcome, the mix of factors suppressing pricing in property/casualty market will likely hang around a bit longer.
A new report from Hartford, Conn.-based
“The combination of continued price decreases in most commercial lines of business, and the recession suppressing exposure growth, continues a string of negative premium growth for 2009 that began in 2007,” says Clint Harris, an analyst at Conning. “But recessionary conditions also can suppress losses, including reduced frequency from fewer exposure units and reduced loss severity due to deflation in some property loss cost drivers.”
To compile the report, “Property-Casualty Forecast & Analysis,” Conning used its proprietary industry model and also analyzed key industry drivers, including first-quarter 2009 and previous statutory data filings, public insurer reports on first quarter results and 2009 catastrophe loss estimates to date.
Conning predicts moderate deterioration in combined ratios through throughout 2010, and only sees modest improvements beginning in 2011. Stephan Christiansen, director of research at Conning, says the soft market conditions are more likely to persist in commercial lines than personal lines.
“Looking beyond this year, an expected slow economic recovery in 2010 and a return to more robust growth in 2011 lead to an increase in both premium and loss exposures, but also may include the start of an acceleration in inflationary factors that drive loss severity,” he says “We see indications of price firming in personal lines, but continued mixed conditions in commercial lines. Capital conditions remain strong, particularly in commercial lines, and it is likely that further stresses will have to occur before any significant broad-based change in pricing will emerge.”
