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The property/casualty insurance industry’s combined ratio increased by about four points in 2016, with no imminent reversal in competitive pricing expected, says a report issued Tuesday.
Driven in part by American International Group Inc.’s underwriting results, the industry’s combined ratio increased to 99% last year, although 2016 was the industry’s fourth consecutive profitable underwriting year, said Fitch Ratings Inc. in its report.
Excluding New York-based AIG, the industry would have reported a combined ratio that was 3.4 points lower in 2016, said the report.
“Large changes for adverse development centered in longer tail casualty segments and the impact of other strategic business mix and reinsurance changes greatly affected AIG’s commercial lines performance,” said Fitch in its special report, “U.S. Commercial Lines Market Update, Cyclical Pressure Mounting in 2017.”
In the industry overall, commercial auto continued to be the “weakest link” in commercial underwriting performance, with a combined ratio of more than 110% in 2016, said Fitch.
The report said commercial property lines remain a key driver of underwriting profits, while workers compensation results have been a “major bright spot” over the past two years.
However, “Commercial lines market pricing weakened significantly in the last three years, with commercial property rates exhibiting the largest recent declines,” said the report.
“Strong market underwriting capacity in all major segments makes it unlikely that a catalyst for a pricing reversal will materialize soon,” the report said. “Commercial auto is the only segment showing positive current rate movement in response to further large underwriting losses.”
Bangor, Maine-based Cross Insurance, a subsidiary of Cross Financial Corp., said Monday it had acquired the A.E. Barnes Insurance Agency of South Weymouth, Massachusetts, for an undisclosed sum.