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Stable 2016 forecast for U.S. property/casualty insurers

Stable 2016 forecast for U.S. property/casualty insurers

U.S. property/casualty insurers will likely experience stability in 2016, according to a report released Tuesday by Standard & Poor's Rating Services Inc.

“However, this stability does not mean that insurers have become complacent,” said New York-based S&P in “U.S. Property/Casualty Insurer 2016 Outlook: Playing It Safe.” “Rather, they're on the lookout for emerging risks that could pose a higher threat to the sector than the usual suspects.”

The report said insurers are continuing to show restraint in the face of ample capitalization and low interest rates, favoring underwriting profitability over market share. “In addition, overall reserve releases have been developing favorably, and we expect continued prudence for the current accident years.”

These are among the reasons S&P said it is maintaining its stable outlook for the sector.

S&P said it expects “shorter, less-acute underwriting cycles” owing to both improved data analytics and “rational underwriting.”

The rating agency reported that despite the continued low interest rates, insurers aren't assuming greater risks. In fact, the report said that emerging risks — such as cyber, liability, and the sharing economy —pose a higher threat than softening pricing to insurers.

It added that mergers and acquisitions are becoming an “attractive capital-deployment alternative to share buybacks, more so for foreign buyers.”

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