Fitch sees 2008 underwriting loss for P&C insurers

NEW YORK, June 11 (Reuters) - U.S. property and casualty insurers, coming off several years of strong profits, will see underwriting losses due to a softening market conditions in 2008, according to Fitch Ratings.

Fitch said on Wednesday it sees a flattening of growth for policy sales in that sector.

The rating agency also forecast an average combined ratio of 100.4 percent, indicating that property-casualty insurers will pay out more on claims and underwriting expenses than they earn in premiums.

The sector posted a combined ratio -- a measure of how much is spent for every dollar of premium earned -- of 95.6 percent in 2007, indicating that overall the industry made more than 4 cents on every premium dollar.

Historically, the property and casualty sector has rarely recorded a profit on its main business -- insurance sales. The industry recorded an underwriting loss in every year from 1978 to 2004. Underwriting profit was earned in 2004, 2006 and 2007, with investment returns counted on to make up the shortfall in loss years.

Fitch said it expects P&C insurers to see a return on surplus in 2008 of 7.6 percent, down from 12.3 percent in 2007.

The insurance industry has seen a drop in the rates they can charge customers for many types of coverage, after several years of lower claims, leading to a rise in capacity. (Reporting by Lilla Zuill, editing by Leslie Gevirtz)