US P&C faces slower reserve releases, higher loss trends

Positive P&C pricing and rising investment income in the US insurance sector are expected to be offset by slower reserve releases and higher loss trends in 2019, according to Morgan Stanley analyst Kai Pan.

Higher loss trends in personal auto severity are likely to be driven by more expensive components in newer cars. Higher workers' compensation frequency is expected due to tight labour markets. Professional liabilities lines are likely to face higher litigation expenses, Pan noted.

Meanwhile, after two active years of catastrophe losses totalling around $200 billion, Morgan Stanley expects “modest pricing increases” to sustain in 2019. Analysts expect “stable” rate increases of between 2 percent and 3 percent in commercial lines. In personal lines pricing is set to moderate but remain positive, according to the investment bank. Reinsurance pricing is set to stabilize, analysts added. In addition, Morgan Stanley expects rising yields to drive +7 percent investment income growth in 2019.

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