Top 10 P&C Insurance Stories 2005

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Insurers hammered by storms, Spitzer probes, but overall marketremains stable

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

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

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Insurers are in the same boat this year. The p-c sector startedout 2005 with a bang, reporting its best quarter ever in the firstthree months of the year, highlighted by an amazing combined ratioof 91.9. Once again, however, a series of hurricanes–led by theworst ever, Katrina–leaves insurers wondering whether red ink willoverflow onto their balance sheets.

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Despite $27.5 billion in catastrophe losses, the industry wasstill able to report $38.7 billion in net income for 2004–postingits first full-year underwriting profit since 1978 and boasting acombined ratio of 98.1–but profits will be harder to come by thisyear, with catastrophe losses already over $50 billion and themarket softening for most of the year.

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

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

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

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As always, I remind readers that my Top-10 list is completelysubjective. If you feel my ranking is mistaken, or that I'veneglected to highlight a more important development than thoseaddressed here, feel free to alert me at [email protected]. A followupcolumn might be in order.

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Good luck in 2006!

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Flag: Editor's Picks

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Head: And The Winners Are…

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

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o #1: Hurricanes Cause Record Losses–Page 14

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

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

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o #4: Flood Exclusion Challenged–Page 21

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o #5: Industry Titan Toppled–Page 22

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

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

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

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o #9: Swiss Re Seeks Top Spot With GE Insurance Acquisition–Page26

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

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Captions For Art:

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–Spitzer Shot:

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Crusading Spitzer Keeps Heat On Brokers, Insurers

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–Greenberg Shot:

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Greenberg Pays Huge Price For Finite Re Deals

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–Storm Damage Shot:

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Record Hurricane Losses Top $50 Billion

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