Insurance Blog

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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Insurance executives see continued unemployment and increasing regulatory intervention as the largest barriers to economic recovery, according to an annual survey conducted by KPMG. The scarcity and high cost of capital was cited as the third largest barrier to overall economic recovery, even though nearly one third (31 percent) of executives indicate they don’t anticipate their company will need to access additional capital over the next 18 months. In the event their company did decide to access additional capital over the next 18 months, 22 percent said the most likely source would be equity while 17 percent said it would be debt. Despite the challenges surrounding access to capital, 73 percent of executives say they expect an increase in mergers and acquisitions when compared to the last 12 months. Asked to identify the most significant challenges they face in the next three to five years, 30 percent of respondents cited […]

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Economic factors have likely played a role in the 10 percent decline in the total number of workplace fatalities recorded in the United States in 2008, according to a preliminary report from the Bureau of Labor Statistics (BLS). BLS said preliminary figures indicate a total of 5,071 workplace fatalities were recorded in 2008 – the smallest annual preliminary total since 1992 – down from 5,657 in 2007. Based on these preliminary counts, the rate of fatal injury for U.S. workers in 2008 was 3.6 fatal work injuries per 100,000 full-time equivalent workers, down from the final rate of 4.0 in 2007. BLS cited the impact of economic factors, noting that average hours worked at the national level fell by one percent in 2008. Some industries that have historically accounted for a significant share of worker fatalities, such as construction, experienced larger declines in employment or hours worked. Workplace fatalities in […]

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We’ve blogged before about how mounting job cuts amid the economic downturn are resulting in an increase in employee lawsuits. At a public hearing yesterday the Equal Employment Opportunity Commission (EEOC) focused on recent developments in age discrimination complaints. According to the EEOC, while overall job discrimination complaints were up by 15 percent in 2008, the number of allegations of age discrimination increased by nearly 30 percent, compared with 2007. The EEOC is now considering new regulations to protect older workers from job discrimination in the wake of recent adverse court decisions that have made it harder for older workers to successfully challenge age discrimination under the Age Discrimination in Employment Act (ADEA). For example, just last month in a 5-4 ruling the U.S. Supreme Court ruled that employees bringing federal age-discrimination claims bear the burden of proving their age was a key factor in their reassignment by an employer (Gross […]

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Results for the property/casualty industry over the next few years will be driven by the 2009 recession, mixed insurance premium pricing momentum and modestly deteriorating underwriting results, according to the latest Property/Casualty Forecast & Analysis by Conning Research and Consulting. The combination of continued price decreases in most commercial lines of business and the suppression in exposure growth due to the recession continues a period of negative premium growth that began in 2007. However, Conning also notes that recessionary conditions can suppress losses, including reduced frequency as a result of fewer exposure units and reduced loss severity due to deflation in some property loss cost drivers. Looking beyond this year, Conning expects slow economic recovery in 2010 and a return to more robust growth in 2011 leading to an increase in both premium and loss exposures. This may also include the start of an acceleration in inflationary factors that drive […]

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The economic situation will impact both life and non-life insurance growth in 2009 but a recovery is expected in 2010, according to the latest world insurance report from Swiss Re sigma. Swiss Re projects that growth in life insurance premiums in 2009 will remain subdued or may even turn negative as turbulent stock markets and gloomy employment prospects continue to negatively impact sales of unit-linked savings products. However, as the economy recovers it expects both higher life premiums and better investment results as asset prices are expected to improve. Meanwhile, non-life premiums are expected to remain flat in 2009 as the economic downturn curbs demand, particularly in the commercial line of business. However, capital shortages may trigger an upward movement of prices that will support underwriting results. Demand for additional cover should also increase in 2010 along with the economy. The upshot is that results in non-life will improve due […]

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