Fitch Ratings has raised its sector outlook on the U.S. property and casualty insurance industry to "Stable" from "Negative" for both the commercial and personal sectors.

Fitch upped the outlook because its analysts believe most insurer ratings will be affirmed as they are reviewed over the next 12 to 18 months.

The change reflects Fitch's view that "the industry withstood the recent financial crisis reasonably well, particularly in comparison with other financial services sectors."

Property and casualty insurers lost lots of money in 2008 but benefited from the investment market recovery last year, Fitch said. Combined with improvements in underwriting performance, that helped the industry return to previous strong capital levels, the ratings agency said. Companies also have significant unrealized investment gains on their books.

Fitch shifted the outlook to "Negative" in October 2008. After that, company downgrades outpaced upgrades by 12 to 1, but the trend has shifted this year to rating affirmations and revisions of individual companies.

While the industry's near-term profit prospects remain weak, Fitch said the companies look stronger in coming years.

The homeowner segment continues underpriced in many markets, the agency said, and there have been high losses related to weather.

But the auto market is seeing widespread price increases. And weaker recent results at large companies have weighed down industrywide aggregate results.