erate enterprise returns that meet or
exceed a firm’s cost of equity capital.”
NEW YORK—Leaders of the proper-
ty/casualty insurance industry believe
that the worst of the financial crisis is
over, according to a survey conducted
by the Insurance Information Institute
(I.I.I.) at its 13th annual property/ca-
sualty insurance joint industry forum,
held in New York City. Seventy-sev-
en percent of executives in the prop-
erty/casualty industry expect financial
troubles to diminish in 2010.
ployment — people unemployed for
27 weeks or longer — grew to over 6. 1
million as of November 2009, up from
about 1. 3 million at the start of the
recession. Research shows that, when
In the area of torts, 72% of respon-
dents believe that tort trends will dete-
riorate in 2010; 25% believe they will
stay the same; and only 3% believe
they will improve.
On the investment side, 28% of industry leaders expect another down year in the equity markets.
Looking at consolidation, 72% expect an increase among insurers and reinsurers.
Diminish, Yes. End, No. Yet, looking at the industry’s profitability, a majority of industry leaders believe that profits will not improve in most property/casualty lines. Broken down by lines of insurance, only 51% of respondents believe there will be an improvement in personal auto; 37% expect an improvement in homeowners; 16% of respondents expect an improvement in workers compensation; and 23% of respondents expect an improvement in commercial lines.
“Looking forward to 2010,
the economic environment will
improve, but only gradually,
and we will have difficulty
coping with some severe
problems related to the ‘great
recession.’ Interest rates are
likely to stay low for 2010
at least, so that investment
gains are again not likely to
provide a large enough source
of funds by themselves to
generate enterprise returns
that meet or exceed a firm’s
cost of equity capital.”
Dr. Steven N. Weisbart
Unreformed Reformation Industry leaders were asked whether comprehensive financial services reform would be approved by congress and signed into law by president Obama in 2010. Sixty-three percent believed reform would happen. But 50% believed such legislation would be harmful, and 44% believed it would be neutral.
In terms of inflation, 71% of executives believe it will accelerate in 2010. Looking at premium growth, 51% of respondents believe that it will remain flat; 36% believe it will be negative; and 14% believe it will be positive.
About the Forum The property/casualty insurance joint industry forum was created to provide leaders from the widest spectrum of the industry with an opportunity to meet with each other in discussion of topics of general interest. Participants included nearly 250 representatives from property and casualty insurance and reinsurance companies and organizations. Of these, roughly 40% responded to the survey.
As compared with 2009, 79% of respondents believe the combined ratio will be higher in 2010. The combined ratio is a percentage of each premium dollar a property/casualty insurer spends on claims and expenses. The combined ratio was 100.7 in the first nine-months of 2009. (Includes mortgage and financial guaranty insurers. Excluding these insurers, the combined ratio was 99.3.)
these people finally get new jobs, 40% will accept lower pay than from their prior job. This affects consumer buying power in general and the workers compensation exposure base in particular,” he added.
Booming Bankruptcies “Similarly, business bankruptcies have soared, and business formations slumped, so that the demand for commercial insurance in 2010 will rise from a smaller base than would otherwise have been the case,” Weisbart noted.
“Looking forward to 2010, the economic environment will improve, but only gradually, and we will have difficulty coping with some severe problems related to the ‘great recession,’” said Dr. Steven N. Weisbart, senior vice president and chief economist with the I.I.I. “For example, long-term unem-
Investments in the Dumper
“Insurers invest mainly in intermedi-
ate-term and long-term bonds, and
in prior years when interest rates were
higher, investment gains could over-
come underwriting losses,” Weisbart
explained. “But interest rates are likely
to stay low for 2010 at least, so that in-
vestment gains are again (as in 2009)
not likely to provide a large enough
source of funds by themselves to gen-
The sponsoring organizations of the
forum represent a wide spectrum of in-
surance interests and audiences. They
include: ACORD, American Institute
for Chartered Property Casualty Un-
derwriters, American Insurance Asso-
ciation, the Association Of Bermuda
Insurers and Reinsurers, The Gene-
va Association, Institute for Business
& Home Safety, Insurance Informa-
tion Institute, Insurance Institute for
Highway Safety, International Insur-
ance Society, ISO, National Associa-
tion of Mutual Insurance Companies,
National Council on Compensation
Insurance, National Insurance Crime
Bureau, Property Casualty Insurers
Association of America, Property Loss
Research Bureau and Reinsurance As-
sociation of America.
References:
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