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Soft market set to continue: Fitch

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The U.S. property/casualty insurance market is unlikely to harden significantly next year as competition continues to promote low pricing and there is no sign of meaningful change in underwriting capacity, Fitch Ratings said in an analysis.

The New York-based rating agency, which has a stable outlook on the industry for 2011, said a major catastrophe or other sharp loss next year could lead to a negative outlook.

Other factors that will affect the market include diminished loss reserve redundancies and investment challenges in light of low interest rates and lower invested asset leverage, given recent declines in industry premium volume, Fitch said in the report, “2011 Outlook: U.S. Property/Casualty Insurance,” which was issued last week.

For commercial lines in particular, Fitch said it believes pricing will continue to fall moderately.

“There is a chance that the soft pricing environment will intensify before any market turn takes hold. Grossly inadequate rate levels, similar to some past cycles, would produce much larger underwriting losses than those encountered recently,” Fitch said in the analysis.