In the face of a record catastrophe season, state residualmarkets need to take a dose of reality and think about increasingpremiums to reflect risk or face serious trouble in the future, anindustry economist said.
Robert P. Hartwig, vice president and chief economist for theInsurance Information Institute in New York, said the reality ofthe catastrophic losses the insurance industry has experienced thisyear from hurricanes will mean higher rates for homeowners andcommercial clients for years to come. He said strains from thelosses will mean primary insurers have to increase premiums andre-examine their risk appetites in the wind-exposed regions.
Some insurers, Mr. Hartwig observed, will seek to reduce theirexposure. The reluctance of new capital entering that marketplacewill mean fewer primary insurers and more policyholders turning tothe state residual markets for insurance.
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