Entering 2007, the property-casualty and title insurance industries have received stable ratings from Fitch Ratings service.
But Fitch said while the p-c market appears to be finding some bright spots, title insurers may have a rough road ahead.
In today's report, "Review and Outlook 2006-2007," on the p-c industry, Fitch said the industry would record profits for the third consecutive year and could post its lowest combined ratio in recorded history in 2006.
After severe losses last year from hurricanes amounting to more than $50 billion--the worst losses the industry has suffered in its history in the United States--underwriters enjoyed a reprieve with no hurricanes hitting the U.S. mainland. However, 2005 revealed the potential for losses insurers can suffer, and insurers need to maintain underwriting discipline going forward, said the rating firm.
Fitch said pricing and underwriting discipline remain the key questions for the industry beyond 2007 as insurers look to grow revenues.
"The industry remains cyclical in nature and favorable market environments have proven unsustainable over the long term," the report said.
"While the market is experiencing the best times currently, a shift to a positive outlook is not anticipated," the report went on to say.
Fitch added it did not see a turn to a negative outlook in the near term as underwriters' balance sheets and capital position have improved, and there was no evident catalyst for a sharp market turn.
In a separate report covering title insurance, Fitch said the six title insurers it covers, accounting for 95 percent of the market, were well positioned to withstand a market turndown as the real estate market slows in the face of increased mortgage rates.
The title insurance industry is also suffering an attack on its reputation with the revelation of "dubious business practices" by members of the industry.
An extended market downturn producing significant operating losses, or "adverse movement in capital adequacy," could lead to changes in the rating outlook. Also, market practice changes or development of products that lessen demand could also change demand, said Fitch.
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