"If pricing trends continue favorably and unusually large catastrophe events are avoided, U.S. commercial lines are positioned well for another year of improvement in 2019," says James Auden, Managing Director, Insurance.
Workers' compensation remains the most profitable major commercial market segment, with four consecutive years of underwriting profits. However, this trend may not be sustainable beyond 2020 if competitive forces and declining premium rates take hold. Workers comp is the only segment within commercial lines to see declining pricing in 2018.
The commercial auto segment continues to lag as rate increases and underwriting actions failed to stem eight consecutive years of losses. Given that track record and continued concerns about loss severity and underwriting quality, Fitch thinks a return to breakeven underwriting results is unlikely in the medium term.
Similarly, commercial property underwriting saw a second year of underwriting losses due to severe natural catastrophe activity.
Fitch maintains a stable outlook for U.S. commercial lines, reflecting the potential for moderately better underwriting profits and the ability of insurers in Fitch's coverage universe to withstand potential adversity due to capital strength.
The full report, "U.S. Commercial Lines Market Update - Further Underwriting Improvement Likely in 2019," is available at www.fitchratings.com.