14 January 2016 Insurance

US P/C sector to remain stable in 2016: S&P

The US property/casualty (P/C) sector is likely to experience another stable year in 2016, according to rating agency Standard and Poor’s (S&P).

However, in its report, US Property/Casualty Insurer 2016 Outlook: Playing It Safe, the rating agency explained that this stability does not mean that insurers have become complacent. It claimed that they are instead on the lookout for emerging risks that could pose a higher threat to the sector than the usual suspects.

"P/C insurers are continuing the restraint they've demonstrated over the last few years in the face of ample capitalisation and historically low interest rates, favouring underwriting profitability over market share," said Tracy Dolin, S&P credit analyst.

"Likewise, eight years following the financial crisis, the sector isn't chasing yields with riskier asset allocations."

S&P also said that overall reserve releases have been developing favourably, and it expects continued prudence for the current accident years, therefore it is maintaining its stable outlook on the US P/C insurance sector. This indicates its expectation of a relatively balanced number of upgrades and downgrades over the next 12 months.

“Although there will always be exceptions, we do not anticipate the overall creditworthiness of the US P/C sector to change in the coming year,” said S&P.

“Any disruption to the sector would most likely come from external factors. Under stressed conditions, we believe insurers with stronger enterprise risk management capabilities will fare better.”

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