Commercial P/C Insurance to Lag Economic Recovery: Conning Analyst

July 21, 2010

While property/casualty personal lines premiums are benefiting from rate growth, commercial lines continue to show softness, and will lag the economic recovery, according to the most recent Property-Casualty Industry Forecast by Conning Research & Consulting.

“Our expectation is for anemic premium growth overall in 2010–weaker than GDP growth–as exposure growth lags economic recovery,” said Clint Harris, analyst at Conning.

“Personal lines products are indicating premium growth that is supported by premium rate growth. In contrast, commercial lines prices continue to show softness, and our commercial premium growth projections in 2011 and 2012 assume that underwriting results will likely get worse before they get better,” Harris said.

Conning forecasts industry growth and performance by line of business for 2010-2012.

Conning’s 2010 property/casualty industry forecast is for net premium growth of 1.4 percent. Although positive, this is much weaker than the forecast real GDP growth rate of 3.3 percent, according to Stephan Christiansen, director of research at Conning.

The analysts at Conning project a combined ratio increase of about 1.9 points, with an estimated average annual catastrophe loss of about $19 billion, due to deterioration in the loss ratio because of eroded premium rate adequacy.

In sum, for 2010 Conning projects an increase in the property/casualty industry’s implied return on equity from 5.7 percent to 6.8 percent, largely driven by an expectation for positive realized capital gains.

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