Driven by a sharp decline in catastrophe losses, the U.S. property-casualty industry posted a $24.4 billion net gain on underwriting through the first nine months of 2006. The figure stands in stark contrast to the $2.5 billion net loss on underwriting through the same period last year.

In a report released today by Jersey City, N.J.-based Insurance Services Office and the Property Casualty Insurers Association of America, based in Des Plaines, Ill., the two groups said the industry's positive underwriting results contributed to an increase in its net income after taxes over nine months to $44.9 billion, compared to $29.7 billion in 2005.

Reflecting the increase in net income after taxes, the industry's annualized rate of return on average policyholders' surplus rose to 13.4 percent, from 9.8 percent in 2005.

The figures are consolidated estimates for all private p-c insurers based on reports accounting for at least 96 percent of all business written by private U.S. p-c insurers.

Robert Hartwig, chief economist for the Insurance Information Institute in New York, noted that the p-c industry's return on equity for the entire year could diminish because of, among other factors, fourth-quarter reserve increases and increase in policyholder surplus.

"Indeed, it is now quite possible that the p-c industry's ROE [Return on Equity] for the full-year 2006 will fall short of the Fortune 500 standard for the 19th consecutive year," Mr. Hartwig said of the 14 percent standard number on ROE.

According to ISO's property claim services unit, direct insured losses from catastrophes dropped to $7.6 billion for the nine-month period, compared to $51.1 billion for the same period in 2005.

Genio Staranczak, PCI's chief economist, termed the 2006 hurricane season an anomaly. "Natural catastrophes still pose a huge threat to consumers and businesses along the Gulf and Atlantic coasts," he said.

The industry, state and federal governments, private businesses and individuals must continue to better prepare themselves by ensuring that financial reserves are adequate, strengthening building codes and land use regulations, and putting in place catastrophe recovery plans to speed relief to those who need it after a disaster occurs, he added.

Special Reports /

Sharp Loss Decline Spells $24B Gain For P-C Insurers

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