P/C Industry Pressured by 2009 Recession; Turnaround in 2011

July 13, 2009

Results for the property/casualty industry over the next few years will be driven by the 2009 recession, mixed insurance premium pricing momentum, and modestly deteriorating underwriting results, according to a new industry forecast report.

“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,” said Clint Harris, analyst at Conning Research & Consulting. “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.”

Harris also said Conning Research sees a trend of moderate deterioration in the combined ratio through 2010, and modest improvement beginning in 2011, excluding unusual catastrophe experience or further turmoil in financial guaranty lines.

The Conning Research study, “Property-Casualty Forecast & Analysis” forecasts industry growth and performance for 2009-2011. The report is based on Conning’s proprietary industry model and analysis of key industry drivers as well as first-quarter 2009 and previous statutory data filings, public insurer reports on first quarter results, and 2009 catastrophe loss estimates to date.

“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,” said Stephan Christiansen, director of research at Conning. “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.”

Source: Conning Research & Consulting,
www.conningresearch.com

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