The outlook for US P&C insurance remains stable
The US property and casualty insurance sector has remained at ‘stable’, despite companies “jockeying for positions”.
According to its latest report, rating agency Moody’s, said that disciplined underwriting and enhanced risk management have been fundamental reasons for the sector’s rating.
"Our stable outlook reflects the insurers' good underwriting discipline, solid balance sheets and enhanced risk management, tempered by low market interest rates and significant catastrophe risk," said Ji Liu, a Moody's analyst. "This sector benefits from the growing US economy along with rising auto and home insurance rates, although we expect smaller rate increases in the year ahead."
The report noted that auto insurers that sell directly to consumers continue to grow faster than peers that sell through agents, and that direct writers have relatively low operating expenses, which allows for extensive advertising and competitive pricing. It also stated that agency writers are growing more slowly, although some are trimming costs and pricing to retain and gain customers.
"Despite the steady price competition, the auto sector is earning modest underwriting profits, as pricing remains ahead of loss cost trends," said Liu.
The benign cat environment and lower reinsurance costs in recent years have benefitted the homeowners sector, prompting some companies to expand their home insurance offerings, even in catastrophe-prone areas. "Although primary insurers benefit from low-cost reinsurance with broad terms and conditions, we expect they'll keep a tight rein on gross and net catastrophe risks," said Liu.
Trends including discounts to customers with favourable risk attributes; discounts for bundled coverages; easy access to policy services, for example, by phone or Internet, including mobile devices; and offering complementary products and services are being witnessed; while renters insurance is a growing market for personal insurers, given the steady upward trend in renter-owned homes in the US, according to the report.