Insurance Blog

The fact that property/casualty insurers recovered more quickly and completely than virtually any other segment of the financial industry is concrete proof that subjecting insurers to bank-style regulation would constitute a significant policy error, according to I.I.I. president Dr. Robert Hartwig.
Such a move would needlessly raise insurance costs for hundreds of millions of insurance consumers and would unfairly require insurers to subsidize the reckless lending practices and speculative activities of failed banks, he added.
Commenting on the industry’s first quarter 2010 financial results, Dr. Hartwig said the rebound in the industry’s claims paying capacity (otherwise known as policyholder surplus) was perhaps the most extraordinary sign of the P/C industry’s resilience over the past year.
Dr. Hartwig noted that policyholders’ surplus increased by $29.2 billion, or 5.7 percent, to $540.7 billion during the quarter, up from $511.5 billion at the end of 2009, although after adjusting for a unique transaction the figure stands at […]

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The fact that property/casualty insurers recovered more quickly and completely than virtually any other segment of the financial industry is concrete proof that subjecting insurers to bank-style regulation would constitute a significant policy error, according to I.I.I. president Dr. Robert Hartwig.
Such a move would needlessly raise insurance costs for hundreds of millions of insurance consumers and would unfairly require insurers to subsidize the reckless lending practices and speculative activities of failed banks, he added.
Commenting on the industry’s first quarter 2010 financial results, Dr. Hartwig said the rebound in the industry’s claims paying capacity (otherwise known as policyholder surplus) was perhaps the most extraordinary sign of the P/C industry’s resilience over the past year.
Dr. Hartwig noted that policyholders’ surplus increased by $29.2 billion, or 5.7 percent, to $540.7 billion during the quarter, up from $511.5 billion at the end of 2009, although after adjusting for a unique transaction the figure stands at […]

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The workers compensation insurance industry is in a precarious position and facing a host of challenges in 2010, according to the annual “State of the Line” report from NCCI Holdings Inc. The pace of economic recovery, the long-term impact of the new federal healthcare law and the potential change in the nation’s financial regulatory system are among the unknown factors affecting the line, NCCI said. It reported that the workers compensation calendar year combined ratio was 110 in 2009 – up 9 points from 101 in 2008. NCCI chief actuary Dennis Mealy observed:
After the prior three years of an underwriting profit followed by two years of minor underwriting losses, the combined ratio for workers compensation shot up 9 points in 2009, the largest single year increase since the mid 1980s. The line was one of only two (in addition to ‘other liability’) that had an increase in combined ratio for […]

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The unsettled economy is having a major effect on insurer claim operations, including rising loss costs, increased levels of litigation and higher rates of fraudulent claims, according to a Towers Watson survey of 52 claim officers. As a result, expense management is becoming a major focus for insurers. The survey found that more personal lines carriers noted higher claim frequency than commercial insurers, including homeowners (52 percent) and auto (45 percent). By comparison, one in five general liability (20 percent) and commercial auto (18 percent) insurers saw increases in claim frequency. Turning to litigation, some 30 percent of respondents said general liability lines have been most affected by an increase in litigation, followed by personal auto (22 percent) and commercial packages (20 percent). On a regional basis, some 50 percent of respondents in the Southeast and 32 percent of respondents in the West reported an increase in litigation. As for […]

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We’re sometimes asked questions about what happens in the unlikely event an insurance company becomes insolvent. The answer is that the insurance guaranty fund system in place for the last 40 years continues to provide a safety net to ensure that the needs of policyholders can be met if an insurance company fails. Not surprisingly people tend to have more questions on insurer solvency during a period of financial and economic volatility. The National Conference of Insurance Guaranty Funds (NCIGF) has just released its annual Insolvency Trends – 2010. In the paper NCIGF cites a recent A.M. Best article indicating that insurance company impairments for both life/health and property/casualty writers were up by at least 30 percent in 2009 compared with 2008. At least 20 insurers became impaired in 2009, up from 15 in 2008 and 14 in 2007. A.M. Best says it can be difficult to track impairments because […]

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Events of the past year have revealed a fundamental need to change thinking on global risks and how they are managed, according to the World Economic Forum’s (WEF) Global Risks 2010 report. Release of the report comes ahead of the WEF annual meeting in Davos-Klosters, Switzerland. With unprecedented levels of interconnectedness between all areas of risk, the report stresses that the need to combat governance gaps globally is greater than ever. Global Risks 2010 identifies fiscal crises and unemployment, underinvestment in infrastructure – especially in energy and agriculture – and chronic disease as the pivotal areas of risk over the next years. Other risks identified as equally systemic in nature and requiring better global governance are transnational crime and corruption, biodiversity loss and cyber-vulnerability. The report notes that the response to the impact of the financial crisis and downturn has been a greater willingness to cooperate on common strategies and […]

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Insurers make key contributions to state, local and national economies, so it’s worth taking a look at the annual list of the most pressing issues on state legislative agendas from the National Conference of State Legislators (NCSL). It forecasts that fiscal conditions will continue to dominate state legislative sessions in 2010, as balancing state budgets and creating revenues top the list. “Economic conditions have forced many states to continue looking at cutting or scaling back programs, increasing taxes and implementing hiring freezes and furloughs. But these actions may not be enough for some state budgets,” NCSL said. Some 35 states and Puerto Rico currently project a cumulative budget gap of $55.5 billion in fiscal year (FY) 2011. At least five states report that an official gap estimate is unknown, but indicated that a gap in FY 2011 is expected, while 16 states do not currently project a gap for FY 2011. […]

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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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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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The first evidence of a rebound in profitability for property/casualty insurers in the wake of the financial crisis that began in mid-2007 is apparent in the first-half 2009 results just released by ISO and the Property Casualty Insurers Association of America. The industry’s annualized statutory rate of return on average surplus of positive 2.5 percent during the first half of 2009 was down from 5.5 percent for the first half of 2008, but up from the negative 1.2 percent during the first quarter of 2009 and positive 0.5 percent for all of 2008. In his commentary on the results, I.I.I. president Dr. Robert Hartwig notes that the industry’s profitability was pulled back into positive territory primarily by a 60 percent reduction in realized capital losses, which shrank to $3.2 billion in the second quarter from $8.0 billion in the first, reflecting improved stock and bond market conditions. Secondary factors included […]

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