P/C market's strong capital position will counteract weak economy: S&P
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The capital position of the property/casualty industry should provide a bulwark against an unpromising economic environment in 2013, a report released on Monday by Standard & Poor's Corp. states.
The report, “U.S. Insurers' Sound Fundamentals Should Counteract Sluggish 2013 Economic Performance,” contends that the industry’s financial fate will continue to be circumscribed by the weak economy.
“Even our optimistic forecast for 2013 is for a subdued recovery, and the base-case forecast is for more of the same, with 2013 GDP growth at about the same sluggish rate as in 2012,” the report. “Like in other relatively mature insurance markets, business volume for U.S. insurers tends to track closely to growth in the overall economy.”
However, the report said the property/casualty sector is likely to be less adversely impacted by the economy than the life and health insurance sectors. “Modest market growth plus some increases in rates resulting partly from Superstorm Sandy may contribute to stronger top-line growth for P/C insurers than for the other two sectors,” the report states.
Moreover, S&P credits the property/casualty sector's “solid financial footing and strong ability to withstand large catastrophes, strong business profiles, and enhanced enterprise risk management capabilities and underwriting discipline” for the stable rating the New York-based ratings firm maintains on the sector.
“Superstorm Sandy could prove to be among the costliest U.S. storms for property/casualty insurers based on preliminary maximum loss estimates of $25 billion,” the report states. “Nevertheless, Standard & Poor's Ratings Services believes that the P/C sector (commercial and personal lines) will maintain its stable credit profile in 2013.”
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Sandy loss estimate excludes business interruption, lost work days
