"You have a number of companies that don't have the latitude any more to go after market share aggressively, and that's going to drive pricing up," said Charles Titterton, a director in Standard & Poor's Financial Services Ratings,
Although the personal-lines sector incurred negligible payouts to terrorism in 2001, some of the large players in the sector did undergo a significant reduction in capital from Sept. 11 losses, because their coverage also straddles commercial-lines business.This effectively reduced supply in the industry.Dividend payments by operating companies to fund stock buyback programs of their parent companies have also limited available capital. Titterton
projects an improvement in the combined ratio for automobile coverage (measuring insurer payouts plus expenses, as a percentage of premium) to about 103.5 percent for 2002, compared with 108.4 percent for 2001.For the homeowners line, where mold exposures have proven a drag on underwriting performance, the combined ratio is projected at 112 percent, compared with 122 percent in 2001.
In the case of State Farm
, which wields about 20 percent of the national personal-lines market, large losses have galvanized the group into pressing for rate increases.State Farm
has also ceased writing homeowners policies for new customers in Texas and California while, for its ongoing policies in Texas, it has filed for very large premium-rate increases and has gained permission to apply more reasonable terms for mold exposure.
The full analysis on personal-lines insurers, contained within a report entitled "U.S. Property/Casualty Insurance Midyear Outlook 2002: Negative Fundamentals Outweigh Higher Pricing," is available on RatingsDirect, Standard & Poor's
on-line research database, at www.ratingsdirect.com.