Swiss Re Says Recovery On Track

By Jim Connolly, NU Life-Health Senior Editor

NU Online News Service, June 26, 2:56 p.m.EST?A continuing insurance industry focus on improvedunderwriting and other fundamentals should be reflected in resultsfor the second quarter, according to a reinsurer's projection.

That forecast came from Thomas Holzheu, senior economist, SwissRe Economic Research & Consulting with Swiss Re, New York, atthe company's mid-year briefing on the status of the insurancemarketplace.

Mr. Holzheu said that efforts by insurers to strengthen theirbalance sheets would continue and "old issues" such as asbestosclaims would continue to be addressed.

Tightening capital is contributing to a harder market, heexplained. On average, he said, commercial line rates are up 10-30percent and personal line rates are up 6-9 percent.

According to Swiss Re, new capacity by global region was brokendown as follows: U.S., 34 percent; and Europe, Bermuda and newBermuda start-ups, 22 percent each.

More generally, the economy is showing signs of recovery,although consumer sentiment may well camouflage those improvements,according to a discussion by Swiss Re experts.

Chris Weihs, vice president-fixed income management, Swiss ReAsset Management, described a period of "symmetrical idiocy" duringwhich the market could experience an "irrational downside" thatmatched the upside the market experienced in 1999 and 2000.

The "extremely negative" investor psychology coupled with issuesof corporate governance and "outright fraud" is creating a "verycautious" environment, he continued.

Investors will look for consistent growth stocks and qualityfixed income holdings, Mr. Weihs added. There will be continuedwariness of technology and telecommunications stocks, he said.

William Yankus, managing director with Fox-Pitt Kelton, a SwissRe investment banking subsidiary in New York, said that theinsurance sector currently has strong fundamentals.

Although the current equities market will affect life insurersand asbestos remains an issue for some property-casualty insurers,there are a number of companies that have the potential forsignificantly enhanced earnings going forward, he added.

Despite this skittishness, Kurt Karl, chief economist, Swiss ReEconomic Research and Consulting, said that an economic recovery ison track. He cited, for example, real income growth of four percentyear over year and a three percent growth in consumption.

Concluding, Karl said that the U.S. is in recovery and a globaleconomic recovery is beginning.