P/C Premium Growth Not Enough for Market Turnaround: Conning

April 25, 2011

The property/casualty insurance industry can expect premium growth of between 3 and 4 percent in 2011, and about 5 percent for the following two years, according to a forecast from analysts at Conning Research & Consulting.

Premium growth rates for the industry through 2013 will be “well short of what would be considered a meaningful turn in the underwriting cycle,” according to Stephan Christiansen, director of research at Conning.

“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, on the 2011 forecast.

At the same time, Conning says 2011 underwriting results are likely to deteriorate about two percentage points this year compared to 2010.

The forecast 2011 combined ratio, between 102 and 103 percent, 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,” Harris said.

According to Christiansen, for 2012 and 2013, there is an expectation of “somewhat more robust economic growth rates,” with premiums growing about 5 percent.

The 2012-2013 commercial lines pricing trend assumes “tailing off of loss reserve releases and a delayed recovery of investment yields, placing additional pressure on operating margins,” the analyst said. “Moreover, much of this is dependent on the pace of the still-sputtering economic recovery, and related cost and exposure drivers.”

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