Moody’s Stays Negative on Global P&C Insurance Sector – Moody’s has declared that its outlook for the global property and casualty (P&C) insurance market remains negative, citing “continued weak underwriting results in personal lines, particularly in the US and Europe.”
The rating agency observed in a report on the subject that primary insurers maintain a bigger proportion of their disaster risk (given a harsh reinsurance market), which is another significant reason of its decision.
“Primary insurers are retaining a growing share of their catastrophe risk, particularly with regard to secondary perils, as reinsurers raise attachment points and rates,” Moody’s said in a statement.
It is no secret that this year’s “secondary perils” are having a significant impact on the sector. According to JP Morgan analysts, such events have “dominated” 2023 thus far.
Returning to Moody’s, the rating agency expects global economic growth to stall as high interest rates “percolate through credit channels to the real economy.”
“Inflation has fallen from highs in the US and Europe, but its impact on P&C insurance claims continues, given big increases in the costs of motor vehicle parts, building materials and labour in recent years,” the company said in a statement.
It was also discovered that the V-shaped COVID recession and recovery resulted in a significant increase in accident frequencies and severity for motor insurance.
“Some top motor carriers have returned to target combined ratios through rate increases and better risk selection; some will take another year or two to reach their targets,” the agency said in a press release.
Meanwhile, commercial insurers are claimed to be profiting from cumulative rate rises dating back to 2017-18, despite the fact that “heightened price competition could dampen their underwriting results in the year ahead.”
Moody’s concluded the research by stating, “A majority of P&C investments are in high-grade bonds and cash, with smaller proportions in equities, alternative investments, and real estate.”
“With market interest rates rising, insurers in the United States and Europe are generating higher investment income.” Portfolio yields will grow even further in 2024 as fresh money yields exceed maturing bond yields.”