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RBC warns softer property pricing and higher cat losses may hit US P&C
RBC says the busiest renewal window for US property insurance, about 30% of annual premiums, falls in Q2, and severe convective storm claims could weigh more than last year even if event counts are lower.
RBC Capital Markets expects the US property and casualty insurance sector to stay competitive into the second quarter, with softer primary property pricing and potentially elevated catastrophe losses weighing on results for both insurers and insurance brokers.
In its outlook, RBC points to Q2 as the busiest period for US property insurance renewals, representing about 30% of annual premiums, and says current competitive pricing conditions are already a widely recognized challenge for brokers. RBC also notes downside risk for carriers if premium growth underperforms more than investors expect, even as it sees tentative signs of improving investor sentiment after a prolonged stretch of pessimism.
For Q2 earnings, RBC expects management teams to report unfavorable trends in property pricing, forecasting modest revenue growth for insurance brokers. At the same time, it suggests insurers may be more vulnerable if their growth disappoints.
RBC also expects catastrophe losses to play a larger role in second-quarter results than they did a year earlier, tying that view to peak severe convective storm season. Using NOAA and National Weather Service data, it says the overall number of severe convective storm events was lower than last year, but it argues location matters more than frequency, pointing to particularly severe tornado and hail activity across the Great Lakes and parts of the Midwest during April and June as a potential driver of higher insured losses.