Jan. 28, 2021 – Author: Luke Gallin
Insurance companies are expected to show underwriting discipline in the coming months, suggesting a strong pricing environment for 2021, which, along with increasing exposure, should support brokers organic growth, according to an analysis by S&P Global Ratings.
In 2020, the market impact, which S&P says is best captured by growth in insurance premiums, encompassing both the insurance rate environment and insurance risks, was a « story of two cities » for brokers.
For 9M 2020, the statutory direct booked premium for property and casualty insurance in the US increased 2.2% and, while positive, represents a decrease in growth from 4.8% in 9M 2019 as interest rate hikes served to reduce exposure to mitigate.
“In contrast, we believe brokers will benefit from both positive insurance rates and increased exposure overall in 2021,” says S&A. P.
Throughout last year, insurance carriers pushed for higher market rates to offset dwindling investment returns, inflationary pressure losses, higher weather-related losses, COVID-19 losses and an expected increase in reinsurance costs as the market solidified.
The reality is that it remains to be seen how costly weather-related events will be for insurers in 2021, but many of the pressures that marked 2020 remain. As a result, S&P expects price momentum to continue over the coming months, but warns that this will slow down.
“Of course, wage developments vary considerably depending on the division, but even employee compensation, the tariffs of which have been falling for years, has approached a turning point,” says the rating agency.
Interest rate dynamics are also expected to be supported by continued underwriting discipline, as insurers’ investment returns will be lower for a longer interest rate environment.
The assets side of the balance sheet is under increasing pressure for insurers and reinsurers of all shapes and sizes. While the investment landscape has been challenging for Carriers, it has also brought a renewed focus on underwriting discipline. A trend that S&P believes will create a rating environment that, despite high capitalization, will remain strong in 2021.
« However, price increases are likely to slow this year as insurers can achieve reasonable underlying profitability and return on investment by compounding interest measures already in place, » explains S & amp; P.
Looking to 2021, S & P’s outlook for the global insurance services sector (insurance brokers, healthcare providers, and warranty and claims administrators) is stable, due to the fact that the global economy has improved in addition to the resilience demonstrated so far during the pandemic.
Insurers, reinsurers and brokers have now started reporting on their results for the fourth quarter and full year 2020.
This morning, Marsh & amp; McLennan Companies, Inc. posted full year revenue growth of 3% from 2020, helped by 7% revenue growth at its reinsurance broker Guy Carpenter.
International insurance broker Howden also reported its results earlier this week. Annual sales were £ 777 million, an increase of 7% over the previous year or 6% in organic growth.
Retrieving your daily reinsurance news from reinsurance news is an easy way to get only the important reinsurance news sent straight to your email inbox.
By submitting the form, you agree to be notified by us by email.