Outlook ‘stable’ for North American P&C market

Standard & Poor’s (S&P’s) says the outlooks on both personal and commercial lines of the North American property and casualty insurance sector remain stable.

The ratings agency based its assessment on two main observations: 1) more moderate price declines have been seen during the year and 2) hurricane claims activity will result in pricing increases.

In response to hurricane-related catastrophes of 2005, the 2006 property and casualty marketplace is moving towards a hardening cycle, S&P’s says. Subsequent rate increases of the hardening market are therefore “considered necessary in light of the catastrophe modeling assumptions having demonstrated serious shortcomings.”

In April 2006, S&P’s revised its outlook on the global reinsurance industry, changing it to ‘stable,’ because of the strong industry fundamentals and the resolution of some of the short-term uncertainties created by the unprecedented scale of the losses arising from the 2005 North American hurricane season.

S&P’s says the stable outlook reflects the current, predominantly-stable nature of its ratings on reinsurance companies. The agency hinted there will be little near-term movement in ratings or outlooks.

Nevertheless, S&P’s says that despite this stable outlook, the industry is in a period of transition and faces many challenges.