Analysts in the report concluded that the stability of P/C commercial lines insurance “reflects the strength of commercial insurers’ earnings over the past several years, despite heavy catastrophe losses and improvements to risk adjusted capitalization.”
Moody’s reported that it expects competition intensity between companies to grow as they work to retain current policyholders while looking for ways to attract new ones. Based on that, the report said larger commercial accounts would have “higher pricing volatility than small commercial accounts, which tend to be less price-sensitive.”
In a statement by Jeffrey Berg, Moody’s senior vice president and author of the report, “despite the recent strong financial performance, the cyclical nature of the P/C commercial lines industry coupled with the inherent earnings volatility, will limit upward rating pressure for most carriers in both the near and medium terms.”
To offset the competition, the report stated that companies are retaining more risk and are increasing efforts to renew existing policies early. It added that companies are using steeper pricing discounts on new business.
Insurers also are more focused on distribution, reaching out to agents and brokers and acquiring distribution channels, which indicates the market is softening, Mr. Berg said in the statement.