Property/casualty insurance sector stable despite ‘tough market’
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NEW YORK — The commercial property/casualty sector will continue to face a challenging 2017 similar to 2016, according to comments made by industry leaders and observers at the Standard & Poor’s 2017 Insurance Conference in New York Wednesday.
The property/casualty sector outlook remains stable, said Tracy Dolin-Benguigui, director and sector lead with S&P Global Ratings Inc. in New York, with close to 90% of company outlooks stable as well.
The stable outlook, however, does not mean an absence of headwinds. “That doesn’t mean we’re not taking a cautious view on some of the trends,” Ms. Dolin-Benguigui said, including diminishing loss reserves and low interest rates.
Further, the sector’s combined ratio is expected to remain high. “We do expect the combined ratio in 2017 to tip above 100% as we just saw in 2016,” she said.
Brian Meredith, managing director with UBS Investment Bank in New York, said UBS was bearish on commercial lines companies during what he said was a period of underwriting margin compression. He saw modest promise in pricing.
“The way we see it now, pricing is kind of flat to up modestly. We do some pretty extensive surveys of agents and risk managers, and they are basically telling us that pricing will be up modestly over the next 12 months,” Mr. Meredith said. “At least we’re seeing some stability there, which is a good thing.”
Company heads acknowledged market headwinds.
“It’s no secret we’re in a tough market,” said Christopher Williams, CEO of Tokio Marine HCC. “Pricing is very, very competitive. We have an abundance of capital with more on the sidelines waiting to come in. It’s very challenging.”
“It’s a challenging market. Rates are probably hovering around zero, maybe a little positive, across different lines of business,” said Michael Foley, Schaumburg, Illinois-based CEO for Zurich North America. “Property is probably more negative, average it out to neutral rates.”
Constantine Iordanou, chairman and CEO of Arch Capital Group Ltd. in White Plains, New York, said he agreed with his colleagues about the challenges facing the property/casualty sector, adding, “Benign loss trends are beginning to change without us getting pricing to compensate for it.”
Companies will have to strive to succeed in such an environment.
“You’ve got to find a way to be smarter in risk selection and pricing,” said Mr. Foley.
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