Catastrophic losses for the 47 major insurers reviewed in 2011 totaled $30.8 billion, which represented more than 11% of earned premiums. In 2010, another year rife with catastrophes, the losses equaled just 5% of earned premium, according to the key ratings service.
Marketwide double-digit returns on capital remain a far off wish because of the continuation of depressed investment yields and competitive market conditions, the key ratings service forecast.
The deterioration of insurer operating results last year reflected not only the impact of heavy catastrophe-related losses (notably the Japan earthquake and numerous inland storms in the U.S.), but also a continuation of weak P-C market fundamentals, it said.
Evidence of a hardening market is “mounting,” according to Fitch, reflected in recent management commentary, as well as renewal rate information from brokers and other pricing surveys. Market segments hardest hit by recent large loss events are experiencing more significant price movements, including property reinsurance, primary commercial property, and homeowners in catastrophe-affected areas, as well as workers’ compensation, which has deteriorated into the worst-performing commercial segment, Fitch said.
While recent favorable pricing movement is encouraging for the industry, questions remain over the sustainability of the trend. Continued premium growth and a hope for reversion toward average historical catastrophe loss experience would be supportive of better profitability this year, Fitch said.
Fitch officials said they continue to “believe that a more meaningful removal of capital or underwriting capacity is necessary before insurance pricing can move to levels corresponding with the strong accident-year returns produced in the middle of the last decade.”