US property and casualty (P&C) insurers should enjoy better performance in the commercial sector this year after a rough 2017, Fitch says in a new report.

Commercial lines represent 41% of US P&C net written premium.

Last year the sector reported a combined operating ratio of 104%, deteriorating from 99% in 2016, driven by higher catastrophe losses on property business.

“A return towards historical norms for catastrophe losses and pricing improvements in the worst-performing market segments should move the commercial lines combined operating ratio back to a modest 2018 underwriting profit,” Fitch says.

“Still, competitive factors and loss trends reduce the potential for larger, near-term profits that would correspond with adequate returns on capital for commercial insurers.”

This is a key consideration in the ratings agency’s negative sector outlook for commercial lines, and industry results in commercial motor insurance remain poor.

“Commercial auto insurance remains a chronic problem for underwriters, despite numerous rounds of rate increases and underwriting actions.”

Workers’ compensation was the most profitable major commercial market segment, posting a third consecutive large underwriting gain last year, in what has historically been a volatile segment.