Fitch Says 2019 Could Be Better Than 2018 for Commercial Insurance

June 13, 2019

Fitch Ratings said it maintains a stable outlook for U.S. commercial lines, reflecting the potential for moderately better underwriting profits and the ability of insurers to withstand potential adversity due to capital strength.

Direct statutory written premiums in the U.S. commercial lines insurance segment grew 5% in 2018, up from 3% the year prior, according to a new report from the ratings form. On a net basis, 2018 premiums grew 15%, an improvement bolstered by U.S. tax laws, which allowed large commercial underwriters to keep more business onshore.

“If pricing trends continue favorably and unusually large catastrophe events are avoided, U.S. commercial lines are positioned well for another year of improvement in 2019,” says James Auden, managing director, Insurance.

Workers’ compensation remains the most profitable major commercial market segment, with four consecutive years of underwriting profits. However, this trend may not be sustainable beyond 2020 if competitive forces and declining premium rates take hold, according to Fitch analysts. Workers’ compensation is the only segment within commercial lines to see declining pricing in 2018.

The commercial auto segment continues to lag as rate increases and underwriting actions failed to stem eight consecutive years of losses. Given that track record and continued concerns about loss severity and underwriting quality, Fitch thinks a return to breakeven underwriting results is unlikely in the medium term.

Similarly, commercial property underwriting saw a second year of underwriting losses due to severe natural catastrophe activity.

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