The property/casualty insurance sector remains well-capitalized but will see rate increases slow in 2022, Fitch Ratings Inc. said Tuesday.
The fundamental sector outlook for U.S. property/casualty is neutral for 2022, Fitch said, adding that insurers have been aided by strength in equities to partly offset the continuing low-yield environment.
Rate increases have averaged 10% for the past seven quarters through the end of third-quarter 2022, which saw an 8.9% increase.
The increases were most pronounced in underperforming segments, including commercial property, auto and liability. Fitch expects “the magnitude of rate increases are expected to decline, but remain positive through 2022.”
While the interest rate from the upward pricing movement is “tempering,” enough momentum remains for that industry combined ratio to moderately improve to an estimated 97% in 2022.
The low interest continued to limit growth, “but positive investment gains from equity market appreciation further boosted net earnings and moved industry policyholders' surplus to another record level,” by the end of the 3rd quarter.
The property/casualty industry capital position has improved during the last 2 yrs and policyholders' surplus has grown by over 30% since the end of 2022 to $988 billion on Sept. 30, 2022, enabling it to service losses.
“The industry's and individual insurers' capital strength provides support against large loss events or a mixture of adverse instances that can be a consequence of catastrophes, economic and investment market turmoil, and adverse claims experience,” Fitch said.
The ratings agency said hello believes that “a broader negative change in industry outlooks and company ratings would most likely need a confluence of huge adverse events, such as catastrophes, investment losses, pricing errors, reserve deficiencies or another pandemic that reduce capital levels very quickly.”
