Property/casualty industry outlook 'upbeat': Barclays
Reprints
The 2013 outlook for the property/casualty insurance industry is “upbeat,” according to New York-based Barclays Capital Inc. in a report issued Thursday.
The sector “benefits from positive price increases that should translate into underlying margin expansion for top-tier insurers,” said Barclays in the report, “U.S. Insurance/Non-Life: 2013/2014 Outlook: P&C Insurance Sector is Attractive Although Price Increases Have Mostly Peaked.”
“Although the pace of commercial P&C pricing increases is no longer accelerating, rate increases could remain in positive territory in 2013, especially after the impact of Hurricane Sandy,” the report said.
The report said sustained property/casualty price increases are “driven by tightening reinsurance market conditions, as well as strong underwriting discipline in light of downward pressure on investment income due to low reinvestment rates and depressed current accident year (returns on equity).” It added that favorable reserve development continues, although Barclays said it expects that to eventually lessen.
The report said Superstorm Sandy, which devastated parts of New York and New Jersey in October, would increase demand for primary commercial insurance and reinsurance. As a result, property reinsurance rates for the critical Jan. 1 renewal season could increase modestly overall and rise 10% or more for loss-impacted accounts.
Barclays cautioned, however, that price increases might not persist because the industry's balance sheet is not yet under severe stress; that reserve releases could continue unabated and boost current-period earnings; and that “normalized” property/casualty industry ROEs are unlikely to improve for several years as a result of sustained low interest rates.
