Profits deteriorate in US P&C insurance sector

Profits for the US property & casualty insurance industry deteriorated in 2005 as a result of record levels of insured catastrophe losses relating to the 2005 Hurricane season, according to Fitch Ratings. The Insurance Services Office’s (ISO) Property Claims Service (PCS) unit reports P&C insurers incurred US$56.8 billion in catastrophe losses in 2005. This figure is roughly double the previous record of US$27.3 billion catastrophe losses paid by insurers in 2004 and the US$26.5 billion paid in 2001, which included the terrorist attacks of Sept. 11, 2001. Despite steady rate reductions in many insurance segments in the past two years, Fitch’s year-end 2005 results reveal that market conditions remain supportive of underwriting profitability for stronger underwriters in the near term. In fact, January 2006 insurance renewal results indicate that rates have increased dramatically in market segments affected by the 2005 catastrophes, particularly P&C reinsurance. Fitch anticipates that pricing will continue to firm in these areas through the remainder of 2006. While the events may promote short-term stabilization in rates for casualty lines and non-coastal property segments, competitive pressure may promote continued rate declines in these segments.