Last year was one of the costliest years for insurers in history, with record-setting Atlantic hurricane losses amounting to $43 billion, as well as man-made catastrophic disasters culminating at $7 billion — nearly double the annual averages from 2007. With claim costs averaging 60 to 70 percent of an insurer’s costs, losses could add a minimum of three to four points on operating costs. This is not a good thing in the current market environment.

Stop the Bleeding

A few years back, a large number of insurers could have absorbed such costs. However, many P&C carriers have seen their results erode because of the current economic downturn and substantial financial losses generated on their investment portfolios. That means many insurers have lost a main source of income.

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