It was the only light moment in an otherwise grim panel discussion about the difficult year ahead for carriers and their producers. During the Q&A, an audience member complained that insurers had no right to be "euphoric" about achieving a 14 percent rate of return last year, even if that was far better than the single-digit results normally posted, because it still trailed broader industry benchmarks. "Do we really look euphoric to you?" deadpanned Ramani Ayer, chairman and CEO of The Hartford.

The response drew hearty laughter from those attending the Property-Casualty Insurance Joint Industry Forum in New York City--or what I like to call the annual family reunion of top p-c insurer and association executives. Unfortunately, Mr. Ayer's quip was gallows humor, as the panel laid out the formidable challenges ahead. Among them:

o The top line will suffer, as commercial lines prices keep falling. Only 4 percent of those surveyed at the forum foresee any growth in industry premium volume this year. Nearly two-thirds (62 percent) anticipate "flat" results, while 34 percent predict a decline.

o The bottom line will erode, with 92 percent expecting a higher combined ratio.

o The economy will keep weakening, and perhaps even devolve into a full-fledged recession. That would slow exposure growth and perhaps spur a hike in the frequency of workers' comp claims and fraud as thousands more are laid off. If the recession goes global, the impact on insurance will be that much tougher to take.

o Investment income will fall along with interest rates, while a volatile stock market makes equities a riskier bet to offset premium deterioration.

o The dollar will continue its dive in value, leaving U.S. insurers, reinsurers and brokerages vulnerable to takeovers by bargain-hunting foreign firms.

o Insurers will be squeezed like Silly Putty by all sides, as stock analysts push for growth (in a down market), shareholders demand better returns (or their capital back), rating agency pressure precludes any irrational rate-cutting to maintain market share (despite intensifying competition), and brokers shop furiously for lower prices (to keep clients happy in a buyers' market).

Of course, carriers are also holding their breath that we don't get hit with another massive hurricane (or two, or three, or four) after two blissfully quiet years. Most insurers and their associations would much rather argue with Bob Hunter of the Consumer Federation of America over whether they are making too much money than have to lay out tens of billions to rebuild another state hammered by Mother Nature.

As if times weren't looking bad enough (at least from an insurance industry perspective), 72 percent of those surveyed predict a Democrat will win the White House. That alone would put a frown on the face of the most happy-go-lucky insurance executive, with the vast majority preferring elephants to donkeys as political pets.

Still, much like insurance itself, the industry's mood is cyclical. It wasn't all that long ago I found the leadership of this business in a similar funk, writing that if the Joint Industry Forum that year would have included a theme song, it would have been, "It's My Party, And I'll Cry If I Want To."

This, too, shall pass. In the meantime, insurers should be heartened by the fact that balance sheets are in good shape, the industry is enjoying record profitability, we've had two years without a major catastrophe, and most carriers have more capital than they know what to do with.

Feel any better?

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