Global insurance market trends

US property/casualty insurance industry

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The slow-to-heal US economy has resulted in reducing net premiums for property-casualty insurers, fostering declines in industry revenues and earnings.

Industry highlights

  • The key performance driver for insurers in today's environment is superior underwriting — and a number of leading insurers are using advanced analytics to gain a competitive advantage.
  • The industry is financially strong and has amassed significant policyholder surplus, which is at or near an all-time high.
  • The industry maintains adequate loss reserves and enjoys access to relatively inexpensive capital.
  • Reduced underwriting profits and investment income will eventually alter the status quo, but this is not anticipated in 2011. Consequently, the key performance drivers in the market remain superior underwriting and risk assessment.

Companies that leverage risk modeling and analytical tools, anticipate regulatory developments, and develop insightful methods of managing their excess capital will be better positioned to achieve growth in 2011.

US property/casualty industry outlook

The property/casualty industry outlook in the US is one of continuing challenges for individual insurers. Many of the same factors that fostered the soft market conditions in recent years remain in play. Nonetheless, the industry is financially strong, thanks to an abundance of capital amassed in 2009 and 2010.

Three factors driving the market

Capital positions are at or near an all-time high and continue to drive price competition in the property/casualty insurance industry. Three other factors are conspiring to maintain the competitive market through at least 2011:

  • A recovery in the value of the industry's assets
  • Access to relatively inexpensive capital
  • Adequate loss reserves to address claim costs

These generally positive factors are contrasted with the industry's ongoing underwriting and investment income pressures. The slow economic recovery, years of price competition and generally low investment returns have compressed the industry's profit margins and are expected to further squeeze individual carrier operating margins.

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