Filed Under:Markets, Commercial Lines

Hartwig: Insurance Industry On The Mend

NU Online News Service, Jan. 10, 2:50 p.m. EST

While the entire year’s results are not in yet, the insurance industry should show significant financial gains for 2010 and its performance will be the best it has experienced since the beginning of the financial crisis, said an industry observer.

“The industry is on the mend,” declared Robert Hartwig, president of the Insurance Information Institute, during a Webinar sponsored by Munich Re titled “2010 Natural Catastrophe Year In Review.”

Mr. Hartwig said in comparison to all of 2009, the industry’s 2010 third-quarter results are close to all of the prior years. While the industry is not back to where it was prior to the economic downturn in 2007 when it reported property and casualty net income of $62.5 billion, it is performing significantly better than the worst of the downturn in 2008 when p&c income came in at slightly more than $3 billion.

For the three quarters in 2010, Mr. Hartwig’s figures showed an industry profit of $26.7 billion, close to the $28.3 billion for all of 2009.

Part of the results is positive premium growth, which follows positive premium growth for 2009, and Mr. Hartwig said this will continue in 2011.

On the investment side, insurers continue to follow conservative investment strategies, with more than 97 percent of that investment in very low risk municipal bonds.

“We should not expect that the current issues in the municipal bond market will in any way impair insurers’ ability to pay claims in 2011,” he said.

“As is generally the case, it is not financial crises or catastrophe losses that tend to cause problems among insures, it is issues related to deficient loss reserves and inadequate pricing,” he said.

The overall capital position remains strong, he continued, and by 2010 first quarter, the industry had recovered all of the capital that was eroded away by the financial crisis.

“Insures ended 2010 with record capital, record capacity, not only in the U.S., but on a global basis as well,” said Mr. Hartwig.

He said the industry is in a position to absorb the kind of losses seen last year from the earthquake in Chile and elsewhere.

Reviewing catastrophes for 2010, Ernst Rauch, head of corporate climate center for Munich Re noted that 2010 was a year for earthquakes, noting the particularly the Haiti and Chile.

The earthquake in Haiti was the deadliest, taking 220,000 lives, while Chile was the costliest disaster in 2010 and the second costliest earthquake for the insurance industry since 1950 at $8 billion in insured losses and overall losses of $30 billion. The event also claimed 520 lives.

Overall, earthquakes produced direct losses of $130 billion and $37 billion in insured losses.

In 2010, the 950 natural catastrophes, Mr. Rauch noted, produced insured losses of $37 billion, direct losses of $130 billion, and 295,000 fatalities.

Carl Hedde, senior vice president, head of Risk Accumulation for Munich Reinsurance America, noted that in the United States, which accounted for the bulk of catastrophe losses worldwide, insured losses totaled $13.6 billion, which was much lower than the 2000 to 2009 average loss of $25.8 billion.

He noted that multiple severe winter storms across the nation led to the highest losses these events have created since 2003. He also said 2010 was the third consecutive year with over $9 billion in insured thunderstorm losses.

The year was also a very active one for Atlantic tropical storm activity, but no hurricanes made landfall in the United States, he noted.

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