Rising US P/C insurance premiums unlikely to lead to ‘hard market’

Written by Adam Cadle

14/11/2019

Rising US P/C insurance premiums are unlikely to lead into hard markets with pricing that generates sustainable adequate capital returns, according to Fitch Ratings.

The P/C market has a history of cyclical underwriting performance driven by competitive factors and uncertainty in pricing risk, influenced by the interplay of capital, premium rates and profit expectations.

The largest rate increases have been in loss-affected property and automobile segments, with increases recently spreading more broadly to other casualty segments. Changes in risk appetite and underwriting limits by a few prominent commercial lines underwriters and reinsurers also promote accelerated rate movement.

“The P/C industry's competitive nature makes hard markets, in which the industry and the average company generate returns on capital at or above required rates, rare and short lived,” Fitch stated.

“Past hard markets were typically preceded by a period of larger underwriting losses and reductions in capital and underwriting capacity. The likelihood of a shift to a true hard market in the current cycle phase is unlikely as market capital and capacity remains ample and competitive pressures will eventually constrain pricing momentum.”

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