NEW YORK – Pricing is improving in the real estate / non-life insurance sector and consolidation is likely to continue despite high valuations, according to a panel of experts speaking Wednesday at the S-P Global Ratings 35th Annual Insurance Conference in New York.
"The outlook from a pricing perspective in commercial lines is pretty good right now," said Brian Meredith, CEO of New York with UBS Group AG.
The expectation of pricing over the next six months is "modestly higher than the last six months," says Mr Meredith, adding an imbalance between supply and demand in excess and the surplus management arena leading to "high single-digit and double-digit price increases".
"Over the past few months," Adult has become more constructive in the sector, especially around some of the pricing comments that have come through, "said Robert Hauff, CEO of Charlotte, North Carolina, for Wells Fargo Securities LLC. 659002] 201
The outlook for the insurance sector is stable, which means as much positive and Negative rating measures are expected, Mr. Iten says and adds that overall S & P expects very few ratings.
"The key factor in our rating is the level of capital adequacy in the industry," says Iten. The other main factor, he said, is "relatively benign economic prospects over the next two to three years . The macroeconomic bases look pretty good, "with a relatively stable GDP growth of about 2%."
The continued consolidation is expected in the sector, according to Mr. Iten, which called insurance "a mature" industry.
In a low interest rate environment, property / accident is one of the few industries in financial that is not entirely dependent on interest rates, Mr Meredith said. "Therefore, you usually see that money flows into property / non-life insurance when you get a diminishing interest rate environment."
I think the long-term outlook for M&A in property / accident is quite good, says Hauff, given low organic sales growth and overcapacity in the business. The next 18-24 months can, however, be "quite slow", as companies focus on organic growth as pricing.
Property / accident valuations are close to historical heights, says Meredith, without any signs of decline. "I do not expect any significant adjustments to values," he said. "In fact, they can actually migrate a little higher."