At its Insurance Market Briefing in London last month, Catherine Thomas, director of analytics for A.M. Best, delivered this observation of the London market:
“Catastrophe losses, a difficult trading environment and shrinking reserve releases are together putting considerable pressure on underwriting results this year, and investment earnings are providing little relief.
“In general, London-market insurers are well-placed to meet these performance challenges. They entered 2011 with strong balance sheets, and losses to date are manageable from a capital standpoint.
“Further material catastrophe losses before the year is out would prove a double-edged sword for the market. While losses would push the year deeper into the red, it is likely that pricing going into 2012, at least for property business, would be much improved.
“Catastrophe experience is not the only issue that London-market insurers are facing this year. In the casualty sector, weak pricing, particularly in the U.S., is putting downward pressure on profit margins and uncertainty regarding reserve adequacy is growing.
“This is of particular concern, given the growth seen from London-market companies in the primary U.S. market in recent years—with a number setting up local admitted and surplus-lines insurers.”
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