Moderate rate gains will push US property and casualty (P&C) commercial insurance underwriting margins into favourable territory over the next year to 18 months, according to ratings agency Moody’s, which has given the sector a stable outlook.

“We expect commercial casualty rates to remain firmly in positive territory as carriers maintain price discipline,” VP and Senior Credit Officer Pano Karambelas said.

However, plentiful capacity and slow economic growth are likely to cap rates, while insurers face combined ratios above 100%, weak investment income and elevated catastrophe loss potential, he says.

In a separate report, Moody’s says it expects US P&C rates on major commercial lines to continue rising this year, following significant increases last year.

The lines include workers’ compensation, commercial general liability, professional liability, commercial auto and commercial multiple peril.

Moody’s says commercial insurers expect average rate increases of about 7.5% on the five lines for this year’s policies, up from a gain of 6.5% last year and 2.5% for 2011.

“Some insurers have reported a modest slowing of rate increases in certain lines of business, most notably commercial property,” it said.

Moody’s also has a stable outlook for the personal insurance industry, in which pricing discipline is expected to remain despite intense competition.

Direct writers of auto insurance continue to gain market share, while some agency writers plan to reduce expenses and set more competitive rates, it says.

Homeowners’ insurers continue to raise rates, tighten underwriting standards and implement other risk initiatives following high catastrophe and weather-related losses in recent years.

“Insurers will remain focused on bottom-line profitability while emphasising product retention, cost efficiency and data analytics,” Moody’s said.