S&P cuts U.S. commercial insurance outlook

NEW YORK, Aug 13 (Reuters) - Standard & Poor's Ratings Services cut its outlook for the U.S. commercial property-casualty insurance sector on Wednesday, saying it now expects to downgrade more companies than upgrade them through 2009.

S&P credit analyst John Iten said the change in outlook, to negative from stable, "reflects our concern over two issues, the ongoing decline in pricing for commercial lines and decreases in investment income."

The outlook revision was S&P's first for the sector in more than three years, and came after it signaled the possible move earlier this year. The rating agency upgraded its view of the sector to stable in 2005.

Barring a costly catastrophe, such as a major hurricane striking a populated area, Iten said he did not see any sign that the "downward direction of (commercial insurance) rates" would swing back over the next 6 to 12 months.

S&P said it sees underwriting results deteriorating over the rest of the year and through much of 2009, but did not expect the decline in rates to cause widespread underwriting losses over the next 12 to 18 months.

But insurers are also grappling with tough investment markets, compounding the problem of lower insurance rates, S&P said. (Reporting by Lilla Zuill, editing by Richard Chang)