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Property, Casualty Insurers Remain 'Strong' After Turmoil - S&P

Source: Dow Jones

Posted on 03 Aug 10

After weathering financial turmoil, the property-and-casualty insurance sector has emerged "financially strong" and well-poised to handle further volatility, said Standard & Poor's Ratings Services in a report last Friday.

The sector saw sharp declines in asset values because of weak investment conditions and other financial-market problems, but their declines weren't as bad as other sectors, S&P said. It noted the industry was able to weather the problems because of significant capital buffers insurers put in place during periods of better business.

"During this recent period of uncertainty and resulting impairments, the majority of P/C insurers demonstrated a commitment and ability to hold asset securities with depressed market values until prices recovered or sales were prudent," said analyst Polina Chernyak.

The insurance industry saw a bit of a respite last year, after 2008 was a big year for disasters, both in financial markets and with storms such as hurricanes Gustav and Ike. Last year, the industry's combined ratio--or the percentage of premiums paid in claims--improved to 101% from 105% a year earlier, and excluding mortgage and financial-guaranty insurers, the ratio improved to 99.3% from 101%.

Still, some insurers' ratings could see pressure after they were forced to sell undervalued securities after they were hit by weaker risk management, aggressive underwriting and inferior catastrophe management, Chernyak said.