Is the property & casualty insurance economic picture betterfrom the outside looking in, or the inside looking out? A panel ofoutside experts, followed by a panel of insurance company CEOs,considered this question at the Property/Casualty Insurance JointIndustry Forum, held Jan. 13 at New York's Waldorf-Astoria.

When asked by moderator Robert P. Hartwig, president of theInsurance Information Institute and an economist, about the 2015financial outlook for P&C insurers, experts describe theeconomic picture as mixed, with all lines facing rate pressure.Matthew Mosher, senior vice president, Global Ratings at A.M. BestCo., says that personal lines should be stable on rates and losscosts; however, he has a more negative outlook for commerciallines. Reinsurance companies, especially, are dealing with ratepressure, new entrants into the marketplace and shrinkingreserves.

Vincent J. (V.J.) Dowling, managing partner of Dowling &Partners, says he is increasingly concerned about low interestrates continuing for a long time, which lets the government helpborrowers—not savers, such as the insurance industry. He notes thatabout 40% of revenue for insurance companies is from theirunderwriting profits. The companies aren't earning much ininvestments with only single-digit returns.

Former Connecticut insurance commissioner Thomas B. Lombardi, asenior insurance advisor at investment banking advisory firmEvercore, says that the high margins in reinsurance are eroding themarket. The issue is that historically low yields on bonds andnontraditional players exist in the market. In addition, regulatorsdon't completely understand the risk this group faces. Due to thesefactors, he says that the small players will get left behind.

The experts agree that competitive pressure is restraining, withminimal to no growth in personal lines claims. For example, saferautos and social pressure for driving safely contributed to feweraccidents. With fewer accidents, companies have less justificationto increase premiums, leading to more intense competition on ratesand long-term revenue decline. Homeowners claims, by comparison,are projected by Dowling to be bigger than Auto over the next 15years.

When asked about industry consolidation, Dowling says that hehas seen more change in the last three years than in the previous30. The influx of third-party capital—from pension funds and hedgefunds, for instance—is changing the underlying economies of theindustry.

The panel of CEOs also considered the P&C insurancefinancial picture, and their views are mixed. When the moderatorBradley L. Kading, president and executive director for theAssociation of Bermuda Insurers and Reinsurers, asked forpredictions, Paula Downey, president and CEO of CSAA InsuranceGroup, a AAA Insurer, says that from a personal lines perspective,she thought the outlook was stable. She agreed that there would berelatively low growth rates for Auto and Homeowners coverage,noting that new car sales are up but new home sales are not.

Jaime Tamayo, president and CEO of MAPFRE USA, says that he seesexcess capital in U.S. P&C companies. He advises insurers toeither accept low returns on equity or put their capital to work.The biggest challenge to Tamayo's personal lines business is theunpredictable weather pattern, causing losses that are less thancatastrophic but significant nonetheless. The low interest rateeconomic environment and compressed margins also are concerns.

Henry Klecan, managing director, P&C and Life operations forSCOR, a global reinsurance company, says that the equity returnsare “not spectacular,” but the balance sheet is strong. For 2015,Klecan said that commercial lines companies need to become smarterabout risk selection and they need to understand their customersbetter.

Steven D. Linkous, president and CEO of The Hartford MutualInsurance Cos., reminded the audience to “remember you're aninsurance company and make good underwriter decisions.” Ifcompanies can follow this advice, they can remain profitable for2015, despite the economy's ups and downs.