Property/casualty industry not expected to bounce back from recession until '11

The economic recession is having a significant impact on the property/casualty insurance industry, and experts don't expect it to rebound in the near future.

According to a recent analysis by Conning Research & Consulting, the property/casualty industry will be driven by this recession, mixed insurance premium pricing momentum, and modestly deteriorating underwriting results. The study forecasted industry growth and performance for 2009-11 and was based on Conning's industry model and analysis of key industry drivers, as well as first quarter 2009 and previous statutory data filings, public insurer reports on first-quarter results, and 2009 catastrophe loss estimates to date.

"The combination of continued price decreases in most commercial lines of business and the recession suppressing exposure growth continues a string of negative premium growth for 2009 that began in 2007," said Clint Harris, analyst at Conning. "But recessionary conditions also can suppress losses, including reduced frequency from fewer exposure units and reduced loss severity due to deflation in some property loss cost drivers. In combination, we see a trend of moderate deterioration in the combined ratio through 2010 and modest improvement beginning in 2011, excluding unusual catastrophe experience or further turmoil in financial guaranty lines."

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Stephan Christiansen, director of research at Conning, said the expected slow economic recovery in 2010 and a return to more robust growth in 2011 may lead to an increase in both premium and loss exposures. However, it may also include the start of an acceleration in inflationary factors that drive loss severity, he said.

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July 30, 2009

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