U.S. property/casualty insurers can celebrate higher overall earnings and premium levels in the 2014 third quarter versus the same period a year ago, Moody’s Investors Service said in a new report. At the same time, competition and winter storms could slow that momentum in the months ahead.

Moody’s-rated U.S. property/casualty insurers produced earnings during the quarter that landed 6 percent higher than the 2013 third quarter, thanks to mild weather and a boost in investment income. Companies also generated a 4 percent jump in net premiums written in Q3 versus the same period last year, due to steadily rising insurance rates and exposures.

Moody’s noted, however, that competition is slowing those rate increases, particularly on the commercial lines side of things. Rates climbed an average of 4.1 percent compared to 4.6 percent in Q2 and 5.6 percent in the first quarter of 2014.

It seems that commercial property rates had the biggest impact on the rate slow-down, according to the report.

“Generally, carriers reported slowing rate increases as insurers emphasized greater retention of more seasoned, rate-adequate business,” Moody’s noted in its report. “Commercial property rates saw the most downward pressure…as favorable reinsurance pricing and increased capacity have boosted appetite for large and middle-market accounts.”

Not to be forgotten, small commercial market accounts generated “relatively higher rate increases,” Moody’s said, and there was relative improvement compared to 2013 in casualty, workers compensation and professional liability line rates.

Another gain: rate increases in commercial auto, something that has not always been profitable for carriers.

Expect market rivalry to keep the heat on in the commercial lines sector, assuming major storms avoid the U.S. in the coming winter season, Moody’s predicted.

“Barring significant catastrophes, we expect increasing pressure on commercial property rates into next year given rising competition and lower reinsurance pricing,” the Moody’s report said.

Moody’s pointed out that personal lines rate continue to climb, but competition will slow those increases, particularly as direct writers gain market share.

“Competition in the personal lines space remains intense,” Moody’s said. “Direct auto raters continue to outpace agency writers in the push for personal auto policies.” That means there will be even more personal lines competitive pressures in the months ahead, Moody’s said, “given improved underwriting profitability and carriers’ renewed appetite for new business growth.”

Source: Moody’s