Friday, March 23, 2012
In the new 2012 outlook report, Fitch Ratings has observed that most P/C insurers’ capital positions are strong enough to manage through significant future adversity.
Fitch Ratings agency issued a “Stable” outlook for the insurance industry.
The report predicts that as premium growth and pricing continues to improve, underwriting and industry profits would boost in 2012.
Through several market surveys and company earnings discussion commentary, it has been revealed that there has been a recent shift in market pricing due to recent expansion of underwriting losses.
The report noted that this positive momentum in premium rates movement is still at an early stage, but market competition remains ferocious.
The extent of capital destruction required to shift market behavior toward the next hard market is still uncertain. According to recent market pricing information by Advisen’s ADVx Pricing Index and company management discussions in earnings conference calls reveal a slight increase and stabilization in pricing.
Though the overall performance seems to be improving, 2012 would still have a lot of underwriting loss for the industry.
Fitch forecasts that the P/C market is still going to experience underwriting losses. It is expecting a combined ratio of around 103 percent and industry return on surplus of 5 percent in the coming year. For the near future, returns on capital are likely to linger in the mid-single digits.
Fitch predicts that in the long run, capital depleting losses such as catastrophes, investment market declines, or unfavorable reserve action, would reset the industry to a negative outlook. Further deterioration in underwriting without proper calculations of a future pricing turnaround would also definitely lead to a negative outlook shift.
Furthermore, based on differences in recent results and important crucial pricing trends, the commercial lines sector is also more susceptible to the negative outlook when compared to personal lines.
Fitch anticipates that favorable reserve development from previous years would be much less helpful in underwriting results compared to last year. In fact, insurers have occasionally complained about reserve deficiencies in certain product lines, especially longer tail risks, such as casualty, workers’ comp, and asbestos reserves.
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Wednesday, March 21, 2012
As the leading greenhouse gas emissions standards upholder in the U.S., the state of California is bearing to push its standards further.
If approved, the proposed rules will require manufacturers to build cars and trucks that emit three-quarters fewer smog-producing pollutants by the year 2025, and mandate that one in every seven new cars to be sold in California be a zero-emission or plug-in hybrid vehicle.
The State’s Air Resources Board had begun hearing statements with regards to its “Advance Clean Car” program this week.
California tops all other U.S. states in greenhouse gas emissions standards for cars and trucks, which went into effect in 2009. The new regulation being pushed this time, the greenhouse gas reduction element was formulated along with federal regulators and 13 automakers so that it will match national standards. This rule is expected to pass later this year.
According to Tom Cackette, deputy director of the air resources board, having the first regulations for clean car was not easy. “When we did the first greenhouse gas standards, it was war,” said Cackette, referring to legal challenges from the auto business. “They sued us in two federal courts. Fortunately, from our viewpoint, they lost.
Over that time, with the increase in gas prices, the shake-up in the auto industry brought new management which looked at the future. Where’s our future? It’s not profits next quarter but how do we make a sustainable business,” Cackette further said.
The proposed new emission standards will start with new cars that would be sold in 2015 and would be more stringent until 2025, requiring 75-percent reduction and 34-percent reduction in smog emissions and greenhouse gas emissions, respectively, in new cars by 2025.
In addition, this new regulations also include an innovated zero-emissions vehicle mandate which aimed to have 1.4 million zero-emission and plug-in hybrid cars in California by the mentioned year. The regulations will also be laying groundwork for the goal of having 87-percent of the state’s vehicle being powered by hydrogen fuel cells, by electricity or other clean technologies.
David Clegern, the board spokesperson, said that the new regulation was planned over a 40-year horizon. It is believed that the regulation will provide the way to shift away from petroleum reliance.
California’s current smog emissions standards is one of the most stringent in the U.S. having its regulations as model being adopted by other states. Other states like New York, Washington, New Jersey and Massachusetts and 10 others adopted California’s emission goals.
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