Property/casualty insurers are facing a difficult environment in 2012, according to a forecast from analysts at a Hartford insurance consulting firm.
The difficult environment will include volatility in the economy, the underwriting cycle, and catastrophe management, combined with low investment yields, said the quarterly Property/Casualty Forecast & Analysis from Conning Research & Consulting.
Conning said it sees premium growth at between three to four percent.
Clint Harris, analyst at Conning, said the expected industry combined ratio of 104 percent for 2012 should improve slightly in 2013 “as the commercial lines rate environment improves and overall inflation remains modest.”
But the overall environment is uncertain and challenging.
“The weak and changing economic recovery and the industry’s response in terms of pricing and reserving will combine to create an uncertain operating environment for management,” said Stephan Christiansen, director of research at Conning. “We forecast modest increase in both exposure and premium rate growth for both 2012 and 2013, but rate firming still fall short of what should be interpreted as a broad turn in the underwriting cycle.”
However, Christansen said, the decline in expected investment yields for the next couple of years is becoming an even more significant factor, and ROE performance is forecast in the low five percent range, similar to levels that preceded the last hard market.