North American insurers expected to balance growth opportunities: Fitch

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With recession at bay and inflation beginning to cool off, North American insurers are expected to balance growth opportunities while weathering potential impediments to growth this year, according to Fitch Ratings analysts and external panelists at the agency’s Insurance Insights 2024 North America investor forum.

Fitch noted that the sector outlooks for 2024 are ‘Improving’ for life and reinsurers, with property & casualty (P&C) holding steady at ‘Neutral’.

Moreover, amid expectations for continued strong capital and improved statutory performance, P&C insurers will navigate what Jim Auden, Fitch Managing Director, US P&C Insurance, says are “numerous pitfalls,” among them struggling personal lines, higher workers comp volatility, a homeowners insurance market that is vulnerable to adverse selection and heightened litigation around social inflation.

Fitch explains that this leads to the crucial question of, can pricing keep up with risk?

At the same time, life insurers are said to be undergoing a change of sorts.

Fitch Senior Director, US Life Insurance, Jamie Tucker pointed towards increasing allocations of private credit and alternative investment managers, which is an area of opportunity that continues to expand further even as rates continue to rise.

Fitch explained that over time, this will likely result in more insurer tie-ups with Alt-IMs originating more assets due to bank lending retrenchment.

There is also expected to be more intense regulatory scrutiny around private credit’s increasing foothold among life insurers.

Fitch also noted that increased regulatory attention will also extend to Bermuda.

Furthermore, favorable pricing and strong margins are expected to continue, though January renewals are pointing to a peak in 2024, noted Brian Schneider, Fitch Senior Director, Global Reinsurance.

However, mid-year renewals in key reinsurer markets such as Florida will help dictate how the rest of the year shapes out for the industry, as well as continued growth in property catastrophe issuance of insurance-linked securities (ILS) as the risk return dynamics have improved for investors.

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