Property/casualty insurers withstand tough economy Insurance Consultant

Property/casualty insurers withstand tough economy

Written on August 1, 2010 – 5:41 am | by Sebastian Braim

Although property/casualty insurers suffered sharp declines in net asset values resulting from weak investment conditions and other difficulties in the financial markets, they have been affected to a lesser degree than other sectors, says Standard & Poor’s Corp. in a special report.

“Moreover, it is our view that the P/C sector remains financially strong and is relatively well positioned to handle any future investment volatility,” said the report, issued Thursday by New York-based S&P.

“Property/Casualty Insurers Maintain Financial Strength Despite a Weak Economy” said the main factor property/casualty insurers consider when developing their investment strategies is maintaining enough liquidity to pay claims.

“This usually results in a more conservative profile with higher-quality and shorter-duration investments,” said the report.

“The asset portfolios of most P/C insurers are risk-averse and tend to be weighted in high-quality, investment-grade municipal, government, and corporate fixed income tables,” it said.

The report noted that during the recent financial turmoil, many property/casualty insurers lowered their exposures to equities, alternatives “and other asset classes that could be more volatile.”

While some property/casualty insurers have broad exposure to lower-rated or longer-duration investments, including residential and commercial mortgage-backed securities, “our analysis suggests that holdings are modest compared with total invested assets and policyholders’ surplus,” the report said.

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