If the economic recovery continues pace, the persistence of soft pricing in property/casualty commercial lines may be coming to an end, a new report from
The most recent edition of Conning’s “Property-Casualty Industry Forecast & Analysis,” forecasts moderate net premium growth of between 3% and 4% for 2011, but adds that deterioration in underwriting results of about a percentage point is to be expected.
“Assuming the economic recovery continues at a modest pace, expected small increases in premium exposures in personal auto and in most commercial lines are the principal drivers of the premium increase,” said Clint Harris, analyst at Conning Research & Consulting. “The forecast combined ratio, between 102 and 103%, includes 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 2007-2010 at above average levels, so much will depend on second-half tropical storm results.”
Stephan Christiansen, director of research at Conning notes that areas dependent on a broader economic recovery, such as a bounce back of investment yields, also will impact operating margins.
“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. Personal lines are expected to see continued single-digit rate firming, with some modest growth in exposures as well,” Christiansen said. “We forecast net premium growth rates of near 5% for each year, well short of what would be considered a meaningful turn in the underwriting cycle. Moreover, much of this is dependent on the pace of the still-sputtering economic recovery, and related cost and exposure drivers.”
