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More competition and change predicted for US insurers

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Property and casualty (P&C) insurers need to evaluate their distribution, underwriting, pricing and risk mitigation business models to break away from their competitors, a new report from Guy Carpenter says.

US P&C insurers are being forced to reassess risk by higher loss trends in several long-tail lines and extreme weather events, says Guy Carpenter’s Risk Benchmarks Research report.

Increased exposure to catastrophes, competition in personal auto, system and technological costs and medical and social inflation are creating challenges but also opportunities, Guy Carpenter says.

“An abundance of capital from a wide range of sources, coupled with evolving catastrophe risks and an extended period of low interest rates, are increasing the pressure on the P&C industry to continue to increase its focus on underwriting.”

The report says the pace of information and technology innovation has influenced how risk is analysed, distributed and mitigated against insurance exposure.

Over the past three years, pockets of volatility and profitability in specific segments have created opportunity for US P&C insurers.

“Each segment has had to wrestle with specific challenges in managing the capital needed to support risk,” the report says.

Large mutuals have experienced catastrophe influences on homeowners and significant competition in personal auto, resulting in an uptake of advanced analytics strategies following four years of poor results.

Regional insurers in the west of the US felt the pain of wildfires, a” once-underestimated catastrophe peril”.

Large commercial insurers have also had to manage volatile liability covers, which are under pressure from rising social inflation and a surge in large property losses.

“The research results by segment and business model emphasise the pressure companies are under to generate profitable returns,” Guy Carpenter says.