The US property and casualty (P&C) market was on track to record a significant improvement in profits last year. Then came Superstorm Sandy.

“Everything changed with Superstorm Sandy’s arrival on October 29, which turned a favourable year into a rerun of 2011,” ratings agency AM Best says in a special report on the US P&C industry.

But it says results are likely to improve this year.

Net written premiums continue to increase, and prices are expected to improve.

The ratings agency says a sluggish economy, low interest rates and the industry’s loss reserve position are presenting challenges, but the industry is sufficiently well-capitalised to overcome them.

AM Best says the industry was heading for a combined ratio of 100.1 until Sandy, which was a major improvement after natural disaster losses gave the industry an underwriting loss in 2011 and a combined ratio of 106.5.

The agency expects the 2012 underwriting loss to be slightly higher, in nominal terms, than 2011, at $US30.8 billion ($29.8 billion). It also forecasts a combined ratio of 106.2, of which 9.4 will come from US catastrophe losses.