NU Online News Service, April 25, 1:34 p.m.EDT

Property and casualty insurers can expect moderate net premiumgrowth but additional deterioration in underwriting results for2011, according to a new forecast and analysis released by ConningResearch and Consulting.

In its forecast for 2011-2013, Conning says 2011 will likely seepremium growth between 3 percent and 4 percent. “Expected smallincreases in premium exposures in personal auto and in mostcommercial lines are the principal drivers of the premiumincrease,” Conning says.

However, the firm projects that underwriting results willdeteriorate by around 2 percent for 2011. Conning says pricecompetition will likely continue in long-tailed commercial linessuch as workers’ compensation throughout the year, but the pace ofcompetition should moderate. “Loss ratios are expected to increasewith the economic recovery as higher-hazard job growth increasesfrequency and severity of average claims,” Conning says.

The firm notes that personal and commercial lines have“developed divergent pricing environments.” While rates areincreasing in personal lines, Conning says, commercial lines remainsoft.

Conning expects a combined ratio of 103.2 for 2011, up from anestimated 2010 combined ratio of 101.5

For 2012 and 2013, Conning says it expects premium rate firmingin commercial lines. “The turnaround in commercial pricinganticipates that insurers will respond to deterioratingunderwriting results and operating ratios over 90 percent in somelines of business, such as workers’ compensation,” Conningexplains.

Conning adds, “The extent of increasing financial strains interms of reduced positive cash flow, waning loss reserve adequacy,and higher combined ratios will set the stage for rate increases in2012 and 2013.”

The industry’s combined ratio is forecast at 102.6 for 2012 and102 for 2013, while premium growth rates are forecast to be near 5percent for each year.

Speaking to the impact of the March 11 Japan earthquake andtsunami, Conning says, “Direct exposure to the losses byU.S.-reporting insurers will be limited.” The firm notes that someinsured U.S. businesses may file contingent business interruptionclaims.

Reinsurance of Japanese exposures is expected to hurt globalreinsurers, Conning says. “Certainly, Munich Re and Swiss Re havereported the potential for losses in the billions of dollars.”

Conning notes that many analysts are not expecting the quake tocause a shift in the global reinsurance underwriting cycle. “Whathappens depends on the accumulation of catastrophe losses,including the earthquakes in Chile and New Zealand, floods inAustralia, and what is yet to occur later in 2011,” Conningsays.