Analysis sees hardening property/casualty rates
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CHARLOTTESVILLE, Va.—The U.S. commercial property/casualty insurance market is showing signs of hardening, SNL Financial L.C. said Wednesday.
U.S. commercial property/casualty premiums grew last year at their fastest rate since 2006 due to underwriting losses and “unfavorable reserve development,” SNL Financial said in its analysis of fourth-quarter statutory insurance data. The analysis includes data on reinsurance, investments, loss reserve schedules and other factors, the Charlottesville, Va.-based firm said in a statement.
The growth in overall premiums could lead to higher rates for insurance buyers, SNL Financial said.
However, the analysis conflicted with other firms’ analyses, which found that property/casualty rates fell in 2010.
“After analyzing data for 95% of the industry, SNL Financial found that the U.S. insurance industry’s negative returns on underwriting continue to deepen and the short-term boost from overreserving for prior years is running out,” Jon Wright, director of insurance, said in the statement. “Overall premium growth continued to recover in 2010, and our findings point to further continuance of that trend in 2011.”
Directly written premiums for the U.S. property/casualty industry increased 2.9% in 2010 and net premiums increased 4% from the same period in 2009. Underwriting losses totaled $2.4 billion, of which $750 million came from additions to prior years’ reserves, SNL Financial said.
In addition, Tim Zawacki, senior industry analyst at SNL Financial, said that American International Group Inc.’s reserve strengthening over several years may have contributed to the industry’s deterioration of profits.
“What remains to be seen is whether AIG is acting first, and (whether) this trend is symptomatic of the entire commercial lines industry, or an isolated event,” Mr. Zawacki said in the statement.
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