Outlook 'stable' for P/C insurers, Moody's says
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The financial outlook for the domestic property/casualty insurance industry is “stable,” according to an analysis released Wednesday by Moody's Investors Service Inc.
In “Stable Outlook for US P&C Commercial Lines Insurers: Good Fundamentals, but not a Hard Market,” Moody's said that the stable outlook “reflects our expectation of moderate rate firming pushing underwriting margins into favorable territory over the next 12-18 months, coupled with improved risk selection and claims processes, which are leading to durable reductions in volatility.”
The analysis added, however, that the insurance sector's prospects for “outsized earnings generation is limited compared to previous hard markets, as plentiful capacity and slow economic growth impose a ceiling on rates.”
Moody's said insurers are being helped by comprehensive risk management oversight supported by quantitative risk analysis, which help identify and manage sources of earnings as well as capital volatility.
“We believe the development of quantitatively based risk oversight is a credit positive, and when properly used, these tools have prompted actions designed to reduce volatility and may help reduce the overall amplitude (peak to trough) of the underwriting cycle,” Moody's said.
