P&C sector faces higher Q4 cat losses: KBW

P&C re/insurers face higher year on year catastrophe losses in the fourth quarter of 2018 results reflecting hurricane Michael, California wildfires, and some smaller events, but overall losses should be manageable, according to Keefe, Bruyette & Woods (KBW) analysts.

Pricing should reflect expected line-specific returns, KBW said, noting that it expects most commercial lines’ increases to strengthen into 2019 while workers' compensation rate decreases should decelerate. Personal auto increases should fade and reinsurance pricing should trend up modestly as demand growth outpaces (still-ample) capacity, according to KBW. “We expect 1/1 reinsurance pricing commentary to be slightly better than initial broker reports, reflecting initially-incomplete programmes,” analysts said in the report.

Hurricane Michael and the California wildfires should produce sizeable (albeit manageable) catastrophe and weather losses, the analysts noted. KBW expects roughly stable core accident-year margins in most lines besides as earned rate increases should mostly offset higher loss trends. In personal auto, earned rate increases and higher gas prices year on year still imply higher margins year on year, although previously better-than-expected personal auto claim frequencies should get a little worse, analysts noted. In workers compensation rate decreases coincide with reportedly accelerating loss trends while overall, rising casualty loss trends should depress most insurers’ reserve releases, the report added.

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