Top 10 P&C Insurance Stories 2005

Insurers hammered by storms, Spitzer probes, but overall market remains stable

One of America's great philosophers, former Yankee catcher Yogi Berra, commenting on how life's twists and turns keep repeating themselves, observed: “It's d?j? vu all over again!” Insurers, producers and risk managers could certainly relate to that bit of homespun wisdom as they review their respective fates in 2005. Many of the same problems that stood out when this list was compiled at the close of 2004 popped up again while scanning National Underwriter to determine this year's top stories.

Last year, I noted that 2004 had been shaping up to be a banner year, with the industry posting a record $23.5 billion in first-half net income and a stellar combined ratio of 94.4. However, a grand slam of fall hurricanes threatened to rain on the industry's profit parade.

Insurers are in the same boat this year. The p-c sector started out 2005 with a bang, reporting its best quarter ever in the first three months of the year, highlighted by an amazing combined ratio of 91.9. Once again, however, a series of hurricanes–led by the worst ever, Katrina–leaves insurers wondering whether red ink will overflow onto their balance sheets.

Despite $27.5 billion in catastrophe losses, the industry was still able to report $38.7 billion in net income for 2004–posting its first full-year underwriting profit since 1978 and boasting a combined ratio of 98.1–but profits will be harder to come by this year, with catastrophe losses already over $50 billion and the market softening for most of the year.

Then there was the one-man storm shaking the industry to its core–Hurricane Spitzer. The crusading New York attorney general dominated the headlines again this year–driving the industry's highest-profile figure, Maurice Greenberg, out of his AIG posts (after forcing Mr. Greenberg's son, Jeff, to quit as top dog at Marsh last year).

A number of my top-10 picks this year are unavoidably related. Record hurricane losses, for example, prompted an unprecedented legal assault on the industry's flood exclusion and gave rise to a long overdue rethinking of how we should account for such exposures. The second straight year of massive catastrophe losses also threatened to change the market's downward pricing slide in a hurry.

Meanwhile, Mr. Spitzer's probes into bid-rigging, contingency fee abuse and balance sheet manipulation not only had an impact on the brokerage industry's bottom line and standard operating procedure, but also brought down the titan of AIG.

As always, I remind readers that my Top-10 list is completely subjective. If you feel my ranking is mistaken, or that I've neglected to highlight a more important development than those addressed here, feel free to alert me at sfriedman@nuco.com. A followup column might be in order.

Good luck in 2006!

Flag: Editor's Picks

Head: And The Winners Are…

Read all about 10 of the biggest stories to impact the property-casualty market in 2005:

o #1: Hurricanes Cause Record Losses–Page 14

o #2: Spitzer Probes Continue To Rock The Industry–Page 17

o #3: TRIA Extension Ain't Easy–Page 18

o #4: Flood Exclusion Challenged–Page 21

o #5: Industry Titan Toppled–Page 22

o #6: “Rational” Market Survives Storms–Page 24

o #7: Insurers Celebrate Class-Action Reform–Page 25

o #8: SMART Advocates Warn Industry To Wise Up–Page 25

o #9: Swiss Re Seeks Top Spot With GE Insurance Acquisition–Page 26

o #10: Mutuals Don't Want To Be Stuck In SOX Drawer–Page 26

Captions For Art:

–Spitzer Shot:

Crusading Spitzer Keeps Heat On Brokers, Insurers

–Greenberg Shot:

Greenberg Pays Huge Price For Finite Re Deals

–Storm Damage Shot:

Record Hurricane Losses Top $50 Billion

Special Reports /

Industry Hammered By Storms, Spitzer, But Overall Market Remains Rational

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