Rating Agency Model Shows Property-Casualty Insurers' Capital Strength

The US property-casualty insurance sector continued to show extremely strong capital strength in 2021, as measured by Fitch Ratings' proprietary capital model.

In Fitch's 10th annual special report, "2021 U.S. Non-Life Sector Prism Scores," Fitch covers the results from its Prism capital model for 49 US property-casualty insurance groups.

Individual insurers' scores within the rating agency's selected universe did show some downward movement at the end of 2021 from a year earlier, Fitch said, with seven groups seeing their scores deteriorate while only three groups saw their scores improve. Still, all Fitch-rated insurers had a Prism score of "Strong" or higher, Fitch said.

For the US property-casualty sector in the aggregate, Fitch's Prism score is "Extremely Strong," the rating agency said, although the cushion between available capital and target capital has diminished.

From the current position of capital strength, any changes in the group of property-casualty insurers' Prism scores at the end of 2022 will be limited and modest, Fitch said.

Depending on the profile of the insurer, interest rate increases and historic catastrophe losses will decrease available capital for insurers with longer duration assets and property catastrophe exposures, Fitch said. Meanwhile, persistent inflation increases and reinsurance availability will increase underwriting, reserve, and catastrophe risk projections in target capital for insurers unable to push through rating actions or have longer-tailed liabilities, Fitch said.