The rising economic tide, a modest inflationary environment, and larger underwriting losses in 2010 will lead to rate-firming for the property/casualty industry, a new study from Hartford, Conn.-based Conning Research & Consulting finds.
The study, “Property/Casualty Forecast & Analysis,” forecasts industry growth and performance for 2009-2012 and is derived from Conning’s proprietary industry model and analysis of key industry drivers as well as statutory data filings, public insurer reports results, and 2010 catastrophe loss estimates to date.
“Our expectation is for modest growth in 2010, with net premium growth positive, but weaker than GDP growth,” says Clint Harris, analyst at Conning. “Yet we also anticipate deterioration in the loss ratio due to eroded premium rate adequacy and expected thinner loss reserve releases. While the overall combined ratio increase is a significant 2.5 points under average catastrophe load, implied return on equity should increase to approximately 7% due to the positive impact of realized capital gains.”
Yet, Stephan Christiansen, director of research at Conning, concedes not all lines of business will see the rates firm in the near term.
“Looking beyond 2010, more robust growth for the property/casualty industry in 2011 and 2012 will result from increases in both exposures and premium rates,” Christiansen said. “While personal lines is leading the industry even in 2010 with robust premium rate growth, many commercial lines, and particularly workers compensation, will not see improvements in combined ratio until 2012.”
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