6 December 2018News

Insurers globally are displaying underwriting discipline: Moody’s

In what might come as a surprise to some reinsurers on Bermuda, rating agency Moody’s has suggested that property/casualty insurers are displaying underwriting discipline globally, leading to it giving the sector a stable outlook.

The Moody's Investors Service report, "P&C Insurance -- Global: 2019 Outlook stable as disciplined underwriting and strong capital offset rising claims inflation," says the outlook for the global Property & Casualty (P&C) Insurance sector is stable, reflecting insurers' disciplined underwriting standards and strong capital levels.

“The P&C sector's profitability is supported by sustained underwriting discipline and rising investment income, which is being driven by moderately increasing interest rates and a gradual shift towards higher risk assets," said Helena Kingsley-Tomkins, an AVP-Analyst at Moody's.

"However, profit margins face headwinds from rising claims inflation while premium growth is set to decelerate, driven by a slowdown in global economic growth together with high competition."

In the US, homeowners insurers have endured sizeable losses from hurricanes and California wildfires this year, but Moody's expects full-year catastrophe losses to remain well below 2017 levels, and insurers have ample capital and reinsurance to absorb these losses. They will also continue raising 2019 rates to address rising construction costs.

P&C insurers in Europe will likely experience a modest deterioration in combined ratios and investment returns in 2019. While many groups remain disciplined in their underwriting, tough competition will curb their ability to increase prices to offset rising claims, which pose an additional risk to reserve releases.

In Japan, auto insurance will underpin strong underwriting profit, but further improvements are unlikely over the coming 12 to 18 months as insurers have started to reduce premium rates gradually.

In China, combined ratios are set to deteriorate marginally reflecting higher losses in motor lines under a more open price regime but mitigated by tighter control on acquisition expenses.

More on this story

6 December 2019   Solid capitalization and constructive pricing contribute to stable picture.