US P&C Insurers, Global Reinsurers Could See Profits Improve in 2021

US property-casualty insurers and global reinsurers—including Bermuda reinsurers—are positioned to benefit from recovering market conditions in 2021, according to Fitch Ratings.

Higher than expected catastrophe losses and coronavirus-related claims will drive premium rate increases, the rating agency said. (Re)insurers' underlying profitability should improve in 2021 as rate increases across almost all business lines outpace loss-cost inflation and the impact of reduced investment income, Fitch said.

"Tighter underwriting of commercial lines and normalizing catastrophic losses will support underwriting profits," a Fitch statement said. "However, adequate or improved capital returns will continue to be challenged by competitive pressures, lower investment income from persistently lower interest rates, and deteriorating asset quality."

Fitch said that price increases at January reinsurance renewals were "somewhat disappointing for reinsurers." But price increases have gained momentum across renewal periods since the beginning of the pandemic, with the market expected to continue hardening through 2022, the rating agency said.

The sector's capital strength has remained largely unaffected despite substantial pandemic-related underwriting losses in several lines, Fitch said. Insurers and reinsurers took advantage of the low-rate environment and accommodative markets supported by government stimulus to raise capital, Fitch said, with Bermuda companies that rating agency monitors raising approximately $7.7 billion in 2020–2021.

Fitch maintains a stable rating outlook on both the US property-casualty insurance and global reinsurance market sectors.