US insurers benefit from premium pricing

Our Banking Bureau
10 June 2002

The reason is high pricing. Indian public sector insurers are incurring around 300 per cent losses by writing motor insurance business alone. And their plea for upward premium revision fell on deaf ears till the entry of private players.

The global credit rating agency Standard & Poors (S&P) has revised the sectoral US motor and homeowners insurance outlook to stable (from negative at yearend 2001).

In US personal-lines underwriters are generally operating in a more favourable environment than their commercial-lines brethren. Even the State Farm group, hitherto a dampening influence on pricing, is conforming to a firmer pricing trend.

You have a number of companies that dont have the latitude any more to go after the market share aggressively, says Charles Titterton, a director in S&P Financial Services Ratings, and thats going to drive pricing up.

Although the personal-lines sector incurred negligible payouts to terrorism in 2001, some of the large players did undergo a significant reduction in capital from 11 September losses, because their coverage also straddles commercial-lines business and this reduced supply in the industry.

Dividend payments by operating companies to fund stock buyback programmes of their parent companies have also limited available capital.