The U.S. property and casualty (P&C) personal insurance industry has been given a stable outlook for 2018, with carriers’ strong capitalisation and adequate earnings capacity having offset losses from a heavy catastrophe year.
“Insurers’ risk management and capital resources are holding up well against Hurricanes Harvey, Irma and Maria, and the ongoing wildfires in California.”
“It will take time to tally aggregate losses from these events, but we expect that 2017 will be one of the costliest years for U.S. insured catastrophe losses,” noted Moody’s Vice President Bruce Ballentine.
Homeowners policies in areas that have experienced heavy catastrophe losses are expected to see significant rate increases in the high single digits.
Moody’s said companies will raise rates to address higher building costs in a tight construction labor market and rising reinsurance costs.
“For other homeowners business, away from the catastrophe zones, we expect rate increases to continue in the low single digits, keeping pace with inflation,” Ballentine said.
Personal auto insurers have also boosted rates by high single digits in 2016-17 in response to increasing accident frequency and severity trends.
Some insurers now see frequency trends stabilising or improving, based on slower growth in aggregate miles driven along with benefits of accident avoidance technologies, and Moody predicts that this trend together with higher rates, will lead to better auto underwriting results in 2018.
Insurers have successfully mitigated risks by limiting their premium writings in catastrophe zones, pricing their policies to address relevant perils, buying reinsurance to protect earnings and capital, and maintaining strong balance sheets with liquid investment portfolios.
Moody’s also noted that personal insurers have been investing in artificial intelligence, machine learning, Big Data and the Internet of Things, ultimately aiming to deepen customer relationships and strengthen profitability.