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Market weighs on insurers and reinsurers, but brokers faring better: Analysis


Property/casualty insurers and reinsurers face a challenging market in 2014 from increased competition, but the outlook for insurance brokers is brighter because of general economic growth, according to an analysis released Wednesday by Barclays Capital Inc.

The outlook for property/casualty insurers and reinsurers is weakening after achieving peak earnings last year, said Barclays in “Property-Casualty Insurance Outlook Challenged, but a Few Opportunities Exist.” The report said that average commercial property/casualty rates “now barely exceed loss cost inflation” and that commercial pricing “could turn negative in 2014.”

It added that increased competition in the property catastrophe reinsurance market from the influx of alternative capital is likely to be “a multiyear headwind” for the traditional reinsurance sector.

But the picture is better for brokers, according to Barclays.

“Economic growth should be a consistent driver of brokers’ organic revenue growth despite weakening commercial P&C and reinsurance rates,” said Barclays in the analysis. “Strong organic revenue growth should lead to improving margins and earnings for the brokers driven by positive operating leverage and disciplined expense management. As a result, we expect the insurance brokers to generate the fastest (earnings per share) growth in the industry through 2016.”