North American property and casualty insurers were hit hard by catastrophe losses in the first 9 months of 2017, leading to a deterioration in operating results, a new Fitch Ratings special report explains.
Fitch Ratings compiled nine-month GAAP financial results for 52 P&C reinsurers that are publicly traded or report GAAP consolidated results.
The nine-month GAAP financial results for this group show operating return on equity (ROAE) declined to 4.3% compared to 7.1% in the first nine months of 2016. The Fitch report says only seven out of the 52 P&C insurers reported an operating ROAE above 10% through the first three quarters of this year.
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Driven by Hurricanes Harvey, Irma and Maria, reported catastrophe losses nearly tripled from this time last year to $27.9 billion, compared to $9.7 billion in 2016. 2017 could end up being a record year for insured catastrophe losses, as various industry estimates expect losses to reach $70 to $100 billion.
"The reinsurance and Florida specialist segments were especially hit hard by catastrophe losses, which represented nearly 25% and over 16% of earned premium through the first nine months of this year, respectively," said Chris Grimes, a director at Fitch Ratings. Fitch believes that 2017 may see a record for insured catastrophe losses for the U.S. P/C market.
Strong investment results offset the weaker underwriting earnings, the report explains. The aggregate group (excluding Berkshire Hathaway Inc.) reported realized gains of $2.1 billion in the first nine months of 2017, up from a $400 million realized loss in 2016.
Boosting operating results across all sectors, net investment income increased to $36.5 billion, compared to $34.6 billion in the previous year.
Fitch maintains a stable rating outlook for each of the sectors covered in this report (U.S. commercial, U.S. personal, and global reinsurance). Broad-based rating changes are unlikely in the next 12 to 24 months. Personal and commercial lines have stable sector outlooks, while the reinsurance sector's outlook is negative, as intense market competition and sluggish cedent demand have resulted in a soft reinsurance capacity.
Fitch's "North American Property & Casualty Insurers Nine Month 2017 Results" special report is available at www.fitchratings.com.
From: PropertyCasualty360
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