Analytics, EU – Baltic States, Financial Services, GDP

Moody's report, entitled "P&C Insurance -- Global: 2017 Outlook --

Continued Premium Growth Supported by Economy, but Pricing and Investment

Headwinds Remain; Stable Sector Outlook," is available on www.moodys.com.

The rating agency's report does not constitute a rating action. This

report is part of a series of 2017 Credit Outlooks that provide insight

into next year's credit conditions across all sectors. See more at

www.moodys.com/2017outlooks

"We expect continued premium growth, albeit at a slower rate, with the

strongest growth in emerging economies. Low interest rates constrain

investment income and lead to higher asset risk, but promote underwriting

discipline," says Dominic Simpson, a Vice President and Senior Credit

Officer at Moody's.

Moody's says overall premiums will grow in line with GDP, but a subdued

economic environment and competition will act as a constraint. The

strongest growth will be seen in emerging economies, especially Asia,

with rising penetration rates. China, Brazil and other emerging markets

have P&C insurance penetration rates in the range of 1.5% - 2% of GDP,

well below the levels of North America (more than 4%) and Europe (nearly

3%). A growing middle class in these emerging economies will boost

insurance penetration and drive P&C market growth.

Capitalisation will remain robust, but underwriting profitability will

deteriorate, with intensified market competition and pricing pressure. US

commercial insurers are ramping up competitive pressure, with property

pricing trends turning negative in 2015, and casualty pricing likely to

follow with an overall decline in 2016/2017, notwithstanding further

increases in commercial auto rates. European pricing trends are flat to

modestly positive in most markets, with the strongest price increases

coming in the Dutch, Spanish and UK personal motor markets. Such price

increases will partly offset higher frequency and severity of losses,

with higher repair costs related to new technologies fitted into vehicles.

Moody's also expects that reserve releases will continue to bolster

profits but to a lesser extent, while noting that potential claims

inflation accompanying rising interest rates could lead to diminished

reserve adequacy and under-pricing of current business.