Analysts at RBC expect prolonged insurance pricing strength

Insurers’ pricing has picked up in 2019, and this will continue into 2020, as companies look to address recent weak profitability, according to the insurance analyst team at RBC Markets

Lloyd's has had a tough time in recent years with the 3-year average combined ratio for 2016-18 coming in at 105.5%, RBC notes. It says that, as a result, prices have increased 5 percent so far in 2019 on average across all classes, according to Beazley.

“We expect this positive backdrop to continue throughout 2020 as the market continues to fight back against recent poor profitability,” said RBC.

RBC tells clients it sees a number of ways for investors to play a positive pricing story in 2020. Its top pick is Beazley. It also has “outperform” ratings on Lancashire and AXA.

Lloyd's is still a long way off a sub-100% combined ratio, says RBC. Based on its analysis, the Lloyd's market combined ratio on a normalised basis was just under 107% in 2018. This is a slight improvement from the 2017 level of 108.4 percent but demonstrates that the market needs to make significant progress to achieve Lloyd's ambition of a combined ratio below 100 percent.

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