Insurance Blog

The fortunes of ocean marine insurers are inextricably tied to the state of the economy and world trade so in today’s environment of slow economic growth, low inflation and minimal interest rates they really have their work cut out. At the annual meeting of the American Institute of Marine Underwriters (AIMU) in New York City yesterday, AIMU chairman Dennis Marvin noted that with fewer ships to insure, fewer goods in transit to cover with reduced value of merchandise and lower exposures most marine segments are seeing flat or falling premium volume. Combined with more than sufficient capacity, the budget constraints of buyers and shrinking profit margins, these factors are likely to lead to a continuing soft market in 2010, he said. “Now, more than ever, the most successful marine underwriters are the most diligent, knowledgeable and focused on the risks they assume,” Marvin said. Restrictive trade practices, cargo theft and […]

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What a difference a year (and a half) can make. In April 2008, ratings agency Fitch published a report indicating that while the outlook for commercial real estate (CRE) related investments had deteriorated, it did not anticipate a major impact on U.S. life insurers’ capital or ratings in 2008. Now, Fitch has published a revised report projecting that U.S. life insurers may incur CRE-related investment losses in the range of $18.5 billion to $22.6 billion through 2011. Why the reversal in fortunes? Fitch reports that commercial real estate fundamentals are softening as rents are declining and vacancies increasing in response to the broader economic downturn. It expects all commercial property types to experience declines in income and value in this stressed environment. On a positive note, Fitch believes the industry’s loss exposure to CRE-related assets is manageable in the context of the industry’s strong capital position and earnings (industry capital […]

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In the wake of the global financial crisis and amid the unraveling of numerous financial scandals including Madoff, Stanford and Galleon, the 22nd International PLUS Conference in Chicago this week would be anything but dull. Add to the mix an opening day keynote by former President Bill Clinton and a forecast on the industry by I.I.I. president Dr. Robert Hartwig and you have the ingredients for a showstopper. In a speech that spanned major topics such as global warming, healthcare reform, and the struggling economy to name just a few, Clinton gave the crowd of professional liability insurance executives and media (seated in the back row of the conference hall) something to think about. A key theme to come from Clinton and one that is very pertinent for insurers is the interdependence of the world we live in. Interdependence brings both benefits and risks, Clinton noted: “Interdependence means being tied […]

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Spare a thought for San Francisco commuters who face their second day of rush-hour delays following the closure of the San Francisco-Oakland Bay Bridge after a major repair failed Tuesday night bringing down several pieces of steel on to passing vehicles. The incident raises questions about the strength of the bridge in the event of an earthquake. The state of the nation’s crumbling infrastructure has been a growing concern ever since the levee failures in New Orleans after Hurricane Katrina in 2005 and the Minneapolis Interstate 35W bridge collapse in 2007. Last year a report by the American Association of State Highway and Transportation Officials (AASHTO) warned that within the next 15 years almost half of America’s bridges will be over 50 years of age, exceeding the life span for which they were designed. One in four of the bridges are rated as deficient, either in need of repair or […]

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The potential impact of inflation on insurers and reinsurers is a growing concern among industry commentators. On Friday, Towers Perrin warned that future inflation may damage reinsurers’ profitability on all lines of business, with casualty lines hardest hit, leading them to reduce the business they write next year. Towers Perrin estimates that an inflation rate of 3 percent would mean a $1 million claim today could cost a reinsurer $1.113 million on average tomorrow. A five percent inflation rate could result in a claim of $1.195 million – 119 percent of the original claim size. Towers Perrin makes the point that because several years often elapse between rates being set and claims being paid out under reinsurance contracts, inflation is a potential threat and can become a real problem. In addition to claim severity, inflation can also have a knock-on effect on frequency. Periods of high inflation generally correspond with […]

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“Insurance as a Means of Socio Economic Development” is the main theme for the 16th annual conference of the International Association of Insurance Supervisors (IAIS) which opens this Wednesday in Rio, Brazil. A growing number of insurers are tapping into markets in developing countries through microinsurance projects which provide low cost insurance to individuals generally not covered by traditional insurance or government programs. The opening session at the IAIS will address challenges in identifying appropriate regulation and supervisory tools to facilitate access to insurance without distorting the market. Speakers will also discuss regulation and supervision of alternative providers of insurance and proportionate regulation of microinsurance providers. Check out I.I.I. facts and stats on microinsurance.

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U.S. companies are seeing a litigation wave that corporate counsel expect to swell next year, according to the Sixth Annual Litigation Trends Survey from international law firm Fulbright & Jaworski. As predicted last year some 42 percent of in-house counsel at U.S. firms expect an increase in the number of legal disputes their companies will face in the next 12 months, up from 34 percent of last year’s respondents, while 83 percent report that lawsuits have already commenced against their companies. Fulbright reports that large-cap companies have the highest expectation of litigation, with 52 percent forecasting an increase in legal disputes, while 47 percent of public company respondents foresee a jump in disputes. The economy was cited as the key reason for the rising litigation. Regulatory investigations and whistleblower allegations are expected to eat up litigation resources in the year ahead. Looking to 2010, 16 percent of all respondents (and […]

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While the non-life insurance sector was not hit as hard by the financial crisis as many other industries over the past year that does not mean insurers have a smooth path ahead, according to Willis. In the 2010 Marketplace Realities & Risk Management Solutions: Careful Steps, Willis notes that market forces that have led to frenzied competition among insurers may remain in place into 2010, but potential difficulties brewing on the horizon may have a market-turning effect by late 2010 or 2011. Willis identifies reserve adequacy, lower investment income, uncertainty regarding the economy and inflation as four potential threats facing insurers in the coming months. “The general insurance sector has escaped the global financial crisis relatively intact, with investments bouncing back and many companies still benefiting from prior year positioning. However, remaining obstacles will need to be carefully managed in these uncertain times,” Willis observes. Check out a recent presentation […]

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Safer roads and vehicles appear to be contributing to what has been a steady decline in U.S. highway deaths since they reached a near-term peak in 2005. Preliminary statistics from the National Highway Traffic Safety Administration (NHTSA) estimate that 16,626 people died in motor vehicle crashes in the first half of 2009, down 7 percent from 17,871 fatalities in the first half of 2008. The fatality rate (the number of deaths per 100 million vehicle miles traveled) also dropped to 1.15 in the first half of 2009, down from 1.23 in the first half of 2008. A New York Times article by Matthew Wald notes that the recession and high gas prices may also have helped a bit. Preliminary data reported by the Federal Highway Administration (FHWA) shows that the number of vehicle miles traveled in the first half of 2009 declined by about 0.4 percent, or 6.1 billion miles. […]

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Despite the economic recession and tumults in the stock market, all major categories of institutional investors, including insurers, have remained fundamentally committed to the same investment policies they were adopting prior to the credit crunch. In its annual Institutional Investment Report, The Conference Board notes that insurance companies were the least affected of all the institutional investors by plunging stock values due to their lower exposure to stock. “The property/casualty segment, in particular, reported asset distributions substantially identical to those of prior years, when investments in equities were never increased to the level that preceded the U.S. recession of 2001-2002,” the report states. I.I.I. data shows that p/c insurers are conservative investors, with some two-thirds of their investment assets held in bonds. The Conference Board report notes that by the end of 2008, institutional investors as a whole had only 36.6 percent of their assets in equities, down from 47.2 […]

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