New York--Analysts at the annual Joint Industry Forum remained pretty much in consensus yesterday that 2006 will be a good year for the property-casualty insurance industry.

But even as one prominent investment house predicted a 2006 p-c industry return on equity of 15 percent, the analysts were also wondering how long the good times will persist.

Despite record catastrophe losses, the industry posted solid gains last year and even a possible underwriting profit for only the second time over 25 years, they noted.

But concerns were voiced whether pricing discipline will prevail, or will it take another Katrina this year to keep the lid on any unjustified bids for top line revenue at the expense of the bottom?

Brian Sullivan, editor of Dana Point, Calif.-based Risk Information Inc., said in 2006 "executives may just say we are making money, so why don't we just keep doing what we are doing?"

But he does not discount the possibility that "someone will come up with a strategy that calls for cutting pricing to gain market share."

V.J. Dowling, managing director of Farmington, Conn.-based Dowling & Partners Securities, noted, however, that some troubles lurk beneath the current numbers.

"Homeowners is not as profitable as everyone thought it was," he said. "And auto rates are not going up while costs are. But the fact is we are having fewer accidents each year and that can't go on forever."

Mark Puccia of Standard & Poor's said he doesn't expect this year will match last year's performance, which in turn was based on a "wonderful claims experience."

"But there is an awful lot of information out there. For example, Progressive seems to have more underwriting cells than people, and hopefully that will shore up the results this year."

All agreed that the Florida catastrophe market is virtually dysfunctional. "There is no rational reason why any company would put any capital in that state," Mr. Sullivan said.

But until the ability to purchase a home is threatened by a severe capacity shortage, no drastic measures will be taken, he added.

Mr. Puccia warned not to look to the government for these measures. "The degree of distrust for the industry in Washington cannot be underestimated," he said.

Special Reports /

Analysts Agree '06 Will Be Good For P-C

Related Stories

Recommended For You