The U.S. property/casualty insurance industry is enduring tremendous challenges in 2008 as underwriting and investment losses have promoted a sharp decline in earnings and a material reduction in industry capital.
Next year doesn’t look to be much better. Rating firm Fitch projects that industry statutory profitability in 2008 will decline by more than 80 percent from the prior year due largely to less favorable accident year underwriting results, sharply higher catastrophe related claims, and investment losses tied to declining equity markets and widening spreads in non-government bonds.
In a new report, rating firm Fitch discusses its current rating outlook, key items currently affecting market performance, and projections for 2009.
Results are not expected to improve significantly in 2009 as revenue growth is expected to remain relatively flat with premium rates anticipated at best to stabilize in most lines following a period of significant price declines in recent years, according to Fitch.
Fitch also does not expect underwriting results to greatly improve as accident year loss ratios excluding catastrophes continue to increase and benefits from favorable loss reserve development lessen.
Earnings will also be adversely affected by material realized investment losses in the near term, Fitch said.
The report, ‘Review & Outlook 2008-2009 -US Property/Casualty Insurance’ is available at www.fitchratings.com under Financial Institutions > Insurance > Special Reports
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