REVISED III Survey: Slowing Growth In 2003

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By Michael Ha

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NU Online News Service, Feb. 3, 4:27 p.m. EST?A majority of stock analysts and industry professionals in a surveypanel believes insurers will see continued improvement in theircombined ratio this year- even as premium growth starts to cool,the Insurance Information Institute reported.

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In its annual "Groundhog Forecast" survey, the New York-basedtrade group found that the average forecast calls for an increasein net written premiums of 12.2 percent in 2003, resulting chieflyfrom increased prices and, to a lesser extent, higher demand.

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The increase is still high by recent historical standards, theInstitute stated, but it represents a deceleration from the 14percent average gain estimated for last year.

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"In terms of premium growth, the cycle has probably peaked,"said Robert Hartwig, senior vice president and chief economist atIII.

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"But the rate of the growth is only half the story. The questionis, how long will the hard market last? The economics for the hardmarket are so compelling that there is no way it can end withouthurting some insurers," Mr. Hartwig warned.

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On the other hand, the combined ratio for 2003 is projected tobe 103.2, a decrease from an estimated 106.3 from last year andwell below the terrorism-impacted 115.7 result in 2001. If theforecast proves correct, it would be the industry's second-lowestcombined ratio in nearly two decades, III stated.

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"The survey does show an improvement in the combined ratio. Itshows a movement in the right direction," Mr. Hartwig toldNational Underwriter. "But in the third year of the hardmarket, the combined ratio is still unacceptably high. It has to bedown below 95 before insurers can turn in a reasonable rate ofreturn," he noted.

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