Fitch Ratings has released a report reviewing a group of commercial property & casualty insurers (P&C), which includes American International Group, W. R. Berkley, Chubb, CNA Financial Corp, Liberty Mutual and The Travelers Companies
According to Fitch Ratings, the group have demonstrated an operating scale via large premium bases and substantial levels of equity capital.
The rating agency believes that this group is likely to have further diversification internationally or through personal lines operations.
The financial performance is a highly important credit factor for this group, and sources of earnings volatility for these companies may be derived from catastrophe losses on property business and cyclical claims experience in casualty and liability lines.
According to Fitch, the pricing trends across U.S. commercial lines remain favourable but are somewhat offset by rising inflation. On balance, improved underwriting performance is expected near term.
The impact from the coronavirus pandemic on large commercial insurers moderated considerably during 2021 after this peer group was significantly affected across multiple lines in 2020.
Uncertainty remains regarding pandemic- related claims in products, including business interruption, several liability lines and workers’ compensation. Litigation activity related to these claims may be prolonged and take several years to fully resolve.
Financial flexibility is fostered by broad access to capital markets. Holding company financial leverage for this group is typically material, but consistent with rating guidelines.
Investment portfolios for large commercial insurers are generally dominated by high-quality fixed-income portfolios with durations that do not greatly differ from liability durations.
Asset allocations to risk assets vary, with a prudent position in non- investment-grade bonds and equities, and a moderately expanding position in alternative assets, such as limited partnerships, private equity and hedge funds.
