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NEW YORK—Property/casualty insurers are facing new concerns about escalating inflation, according to an analysis released Tuesday by Moody’s Investors Service Inc.
“Until recently, the risk of inflation shocks has not ranked high on the agenda” for U.S. property/casualty insurers, Moody’s said in “Inflation Risk of U.S. P&C Insurers.” But Moody’s said aggressive monetary policy in recent years has raised concerns about escalating inflation over the medium to long term.
“On the investment side, our analysis indicates significant exposure to market value declines in the P/C sector’s holdings of fixed-income securities,” said Moody’s in the report. But the report added that unless a “very significant industry catastrophe” took place, the ultimate impact would be manageable for most firms, which would be able to hold those investments to maturity.
The impact could be different regarding underwriting, though, said Moody’s. It said it expects claims cost inflation to continue to outpace general inflation. Underwriters with long-tail liability lines would feel the greatest impact, according to Moody’s.