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6 Property and Casualty Insurance Stocks to Watch Amid Catastrophes

6 Property and Casualty Insurance Stocks to Watch Amid Catastrophes

With 2020’s hurricane season likely to see 190% more storms than the average season, the Zacks Property and Casualty Insurance (P&C) industry is up for a tough ride. Nonetheless, better pricing, prudent underwriting and exposure growth should benefit Berkshire Hathaway (BRK.B), Progressive Corporation (PGR), Allstate Corporation (ALL), Everest Re Group (RE),  Fidelity National Financial (FNF) and First American Financial (FAF).

While frequent natural disasters should accelerate the policy renewal rate, increasing adoption of technology and emergence of insurtech will help in smooth functioning of the industry. However, pandemic-related uncertainties weigh on merger and acquisition (M&A) activities and industry surplus.

About the Industry

The Zacks Property and Casualty Insurance industry comprises companies that provide commercial and personal property, and casualty insurance products and services. Such insurance coverage helps to safeguard property in case of any natural or man-made disaster. Liability coverages are also provided by some industry players.

Insurance coverages offered by the companies also include automobiles, professional risk, marine, excess casualty, aviation, personal accident, commercial multi-peril, and professional indemnity and surety.

Premiums are the primary source of revenues for these insurers. These companies invest a portion of premiums collected to meet their commitments to policyholders. Thus, a low rate environment is a concern for P&C insurers (especially for long-tail insurance providers).

4 Trends Shaping the Future of Property and Casualty Insurance Industry

Catastrophe loss weighing on underwriting profitability: The property and casualty insurance industry is susceptible to catastrophe events, which drag down underwriting profit. Per reports by Aon, total economic losses in the first half of 2020 was $75 billion, stemming from 207 catastrophe events across the globe while insured losses were $30 billion, 8% higher than the 20-year average. In fact, Colorado State University (“CSU”) expects ‘extremely active Atlantic hurricane season in 2020 and hurricane activity will be

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Australia central bank warns of business failures as property vacancies rise

Australia central bank warns of business failures as property vacancies rise

SYDNEY (Reuters) – Business failures in Australia are likely to rise with commercial property seen among the hardest hit sectors as a shift to work-from-home arrangements empties offices and major retail precincts, the central bank said on Friday.

FILE PHOTO: A businessman walks past the headquarters of Australia’s Reserve Bank in Sydney, November 3, 2015. REUTERS/Jason Reed

The Reserve Bank of Australia (RBA) said the outlook for commercial property means banks’ impairment rates will likely climb from current low levels while some indebted landlords will find it difficult to meet their debt repayments.

Risks appear highest for retail commercial property, the RBA noted, while adding there was still a high degree of uncertainty about the magnitude and timing of business failures in the country.

Australia has been lauded for its success globally to curb the spread of the coronavirus and open its economy earlier-than-expected though with domestic and international borders still shut, activity is expected to remain subdued for some while yet.

Over the first six months of 2020, the Australian economy contracted by over 7% under the weight of strict mobility restrictions to suppress COVID-19.

The unemployment rate has since risen from around 5% pre-COVID to near 7% with economists predicting it would jump to 10% in coming months.

“Secondary-grade offices appear particularly vulnerable to falling demand, as tenants are often enticed by lower rents during downturns to upgrade to better premises,” the RBA noted.

At the same time, a high volume of new office buildings are due for completion in Sydney and Melbourne this year.

“While most of these new buildings have pre-committed tenants, it will put further pressure on vacancy rates in second-grade buildings,” the RBA said.

Given the deterioration in rental conditions already underway, office and retail property prices could fall sharply, the RBA added.


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