The news comes despite forecasts of a hard market with rate increases for various types of insurance, such as homeowner, auto, and property.
S&P’s analysts also predict that P&C insurers in the region will reduce their use of reinsurance due to price increases. “For Canadian P/C insurers, we expect that normalising mobility will undermine personal auto and consolidated underwriting results. However, we still expect underwriting profitability thanks to continued price hardening and normalised natural catastrophe losses.”
Meanwhile, for the US, underwriting income will remain dampened in the near term, with continued pricing actions likely to improve underlying profitability for personal lines, but commercial lines will remain adequate.
S&P also noted that analysts expect overall profitability to benefit from rising yields and improving investment income in 2023. Analysts predict mid- to upper-single-digit rate increases for homeowner insurance and varied levels of rate increases for personal auto insurance, while rate increases for commercial lines, except for property, will be slower than the past two years.
Acceleration of property rates set to continue
Property rates are expected to continue to accelerate due to reinsurance cost pressures, while workers’ compensation rates will remain flat to moderately negative. Finally, analysts believe that P/C insurers will reduce their use of reinsurance by raising their attachment points due to price increases at lower reinsurance levels, which may further expose their earnings to natural catastrophe losses. S&P Global Ratings credit analyst
Simon Ashworth, S&P Global Ratings credit analyst, warned of key risks over the next 12 months, such as capital market volatility, inflation, and interest rates/credit spreads, which could impact projected capital levels and relative operating performance, and therefore insurance credit risk.
He added: “Macroeconomic factors, particularly capital market volatility, inflation, and interest rates/credit spreads are key risks over the next 12 months. Projected capital levels and relative operating performance will be two key determinants of insurance credit risk over the coming year.”
