Moody’s has given the US property and casualty (P&C) insurance sector a stable outlook, with reserve releases and rate rises compensating for poor investment returns and “macro-economic weakness”.

The ratings agency says it expects insurance rates to rise this year across all major US commercial lines, reducing combined ratios by 2.5 percentage points.

The combined operating ratio – in which 100% is break-even and anything below is a profitable line – may fall to 104% next year if current pricing trends hold, Moody’s Senior VP Alan Murray says.

“Pricing trends for US commercial insurers remain broadly positive and reserves remain slightly redundant across most lines,” he said.

“Nevertheless, accident year combined ratios remain in excess of 100%, which, combined with declining investment yields, suggests the need for continued pricing improvement.”

Last month Moody’s said US insurers could expect a bump in earnings after property and casualty insurers’ net income in the second quarter was “significantly” higher than in the corresponding period last year.

In the same month Standard & Poor’s said that while insurers with exposure to crop cover would experience some of the worst underwriting results in two decades, the losses were not likely to affect the capital of most insurers.

Fitch has argued that while a sustained hard market is unlikely, property and casualty rates will continue to rise through to next year, heralding a “long-awaited shift to positive pricing momentum”.