Fitch Ratings has said that favourable pricing is driving underwriting profits for US diversified commercial property and casualty insurers.
A new note from the agency outlines how the insurers it looked at are able to demonstrate operating scale via large premium bases and substantial levels of equity capital. Diversification, said the authors, in geography, account size, and product are being driven by underwriting expertise allied with distribution capabilities.
The note was authored by James B. Auden and Douglas M. Pawlowski, both CFAs at Fitch. They looked at American International Group, WR Berkley Corp, Chubb, CAN Financial Corporation, and The Travelers Companies.
They said: “Financial performance is a highly important credit factor for this group. Sources of earnings volatility for these companies are derived from catastrophe losses on property business and cyclical claims experience in casualty and liability lines. Pricing trends across U.S. commercial lines remain favourable, but are somewhat offset by rising inflation and growing economic uncertainty. On balance, improved underwriting performance is expected near term.”
Cyber exposures, said the authors, were evolving and may be further affected by the conflict between Russia and Ukraine.
They added: “Recent increases in cyberattacks add to operational risks for P/C insurers and underwriting losses for insurers offering cyber coverage. Such attacks may also further test the effectiveness of “war exclusion” and ‘hostile act exclusion’ language. Larger insurers have taken significant pricing and underwriting actions in response to rising cyber claims, including tightened contract language, which should help offset underwriting losses in the current uncertain environment.”
