Property-casualty insurers' results should improve slightly this year and then worsen over the next two years, according to a new study by Conning Research and Consulting Inc.
The Hartford, Conn.-based firm said return on equity for 2004 is expected to be 8.4 percent and will increase to 8.8 percent in 2005. However, forecasts for 2006 and 2007 show returns of 7.4 percent and 5.9 percent, respectively.
Price competition among insurers is expected to rise, Conning said, leading to reductions in premium growth. Premium growth is estimated at 4.1 percent for 2004, 1.5 percent for 2005, and lowering to 1 percent in 2006.
Loss ratios are not expected to fluctuate heavily between 2004 and 2006, but Conning noted that additions to loss reserves for asbestos are expected.
The study also expressed concern over commercial automobile lines as the market appears to be moving into a softer pricing cycle. Average renewal rates began decreasing in the first half of 2005 for the first time since the fall of 1999, the firm said.
The study highlighted the workers' compensation line and forecasted medical costs will increase at a rate of 7-to-8 percent annually over the next decade.
Conning also cites results from the National Council on Compensation Insurance stating that medical costs now constitute 57 percent of total loss costs in workers' comp.
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