|[February 11, 2013]
A.M. Best Special Report: Catastrophes Drive Underwriting Loss in 2012; Better Results Expected in 2013
OLDWICK, N.J. --(Business Wire)--
Through late October 2012, the U.S. property/casualty (P/C) industry was
on track to record a significant improvement in financial results
following 2011's substantial underwriting loss. Hurdles continued on the
investment front with interest rates expected to remain low for an
extended period. Despite this, a steadily firming rate environment,
stabilized economy with an improving-albeit still high-unemployment
rate, and a much lower level of weather-related losses brought the
industry, at September 30, 2012, to a near break-even combined ratio of
100.1 with net income more than twice its 2011 level, according to a
newly released special report from A.M. Best Co.
The October 29, 2012 arrival of what is likely to become the second
costliest U.S. natural disaster-in terms of insured losses after 2005's
Hurricane Katrina-means that 2012 will be remembered as the year of
Superstorm Sandy. The impact has been apparent on income statements
throughout the P/C industry, with the industry's underwriting loss
increasing $26 billion and net income deteriorating $10 billion during
the fourth quarter, based on A.M. Best's estimates of full year 2012
Sandy's impact notwithstanding, several signs point to improvedresults
in 2013. Net premiums written continue to increase, as does
policyholders' surplus. The pricing environment is expected to improve
in 2013, although rate increases may be smaller in magnitude. While the
continuing sluggish macroeconomic environment, persistently low
investment yields and the current loss reserve position of the industry
will present challenges, A.M. Best believes the industry overall is
sufficiently well-capitalized to overcome them.
The personal lines segment has maintained a stable outlook. While
volatility from weather-related events is expected to continue to impact
the property lines, the automobile portion of the segment remains
The commercial lines segment, however, will still retain its negative
outlook in 2013. Insurers are still grappling with competitive market
conditions, less favorable loss reserve development, sluggish economic
growth and depressed investment yields; and these factors will most
likely result in more negative rating actions than positive rating
actions during this year.
The reinsurance sector maintained its stable outlook supported by
continued strong risk-adjusted capitalization, judicious enterprise
risk-management practices and a relatively stable pricing environment
across a broad array of business classes. These strengths should help
sustain reinsurers' overall financial position over the longer term
given uncertain global macroeconomic conditions.
To access the full complimentary report, please visit http://www3.ambest.com/bestweek/purchase.asp record_code=209108.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS
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