NU Online News Service, Jan.13, 1:24 p.m. EST

NEW YORK--Insurance executives polled at an industry conference here for the most part see a year ahead with little growth and more losses.

Their gloomy outlook was revealed in a survey of attendees here at the annual P&C Insurance Joint Industry Forum.

Fifty-one percent said overall industry premium volume would "remain flat" this year, while 36 percent believe premium volume will fall. Only 14 percent expect growth in premiums written in 2010.

Seventy-nine percent believe insurer combined ratios will rise this year, putting the industry into the red in terms of underwriting results. While 51 percent expect an improvement in profitability in auto insurance, only 37 percent think that way when it comes to homeowners' coverage.

Less than one-quarter (23 percent) expect improved profitability in commercial lines overall, and only 16 percent see gains ahead in workers' compensation--a line stressed by the drop in payroll thanks to millions of layoffs across the economy.

"The economic environment will improve, but only gradually, and we will have difficulty coping with some severe problems related to the 'Great Recession,'" Steven N. Weisbart, senior vice president and chief economist with the Insurance Information Institute--which hosted the Forum--said in a statement following the meeting.

"For example, long-term unemployment--people unemployed for 27 weeks or longer--grew to over 6.1 million as of November 2009, up from about 1.3 million at the start of the recession," he noted. "Research shows that when these people finally get new jobs, 40 percent will accept lower pay than from their prior job. This affects consumer buying power in general and the workers' compensation exposure base in particular."

He added, "Similarly, business bankruptcies have soared and business formations slumped, so that the demand for commercial insurance in 2010 will rise from a smaller base than would otherwise have been the case."

While insurers struggle to post profitable underwriting results, according to Mr. Weisbart, little relief can be expected from the investment side of the house.

"Insurers invest mainly in intermediate-term and long-term bonds, and in prior years when interest rates were higher, investment gains could overcome underwriting losses," he explained.

"But interest rates are likely to stay low for 2010 at least, so that investment gains are again--as in 2009--not likely to provide a large enough source of funds by themselves to generate enterprise returns that meet or exceed a firm's cost of equity capital," he added.

On two positive notes, 77 percent of those attending the Forum said "the worst of the financial crisis is behind us," while 72 percent "expect another up-year in the equity markets"--perhaps setting the stage for better insurer results in 2011.

However, 71 percent said they expect "inflation will accelerate in 2010," which could hike loss costs. Indeed, Jay Gelb, a director at Barclay's Capital, cited the risk of inflation as one of the biggest threats to the p&c industry.

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