NU Online News Service, Jan. 19, 3:00 p.m. EST

The bottom-line results in the property and casualty industry are driven by underwriting, not the economy.

Robert Hartwig, president of the Insurance Information Institute, said in a recent presentation, “Personal Lines P-C Insurance Markets: Challenges & Opportunities for 2011 & Beyond,” that the p&c industry is already at the tipping point, recording about a 100 combined ratio in 2010.

In 2011, “underwriting profits and loss will drive the cycle,” Mr. Hartwig said. The industry was only able to muster a 100 combined ratio in 2010 because reserve releases knocked several points from the ratio, he said.

“Managing for an underwriting profit is key,” Mr. Hartwig added.

Reserve releases have “perpetuated the soft market.” Essentially, they have “temporarily masked calendar year results” to make it appear results are better than they are. The pool of reserves available is dwindling.

Additionally, investment income is decreasing, so it will not offset future underwriting losses.

An improving economic environment does provide opportunities for growth. Job growth and improved credit market conditions are expected to boost auto sales and home construction, Mr. Hartwig said.

Net premiums for personal lines experienced a slight uptick in 2010 during the second and third quarters of 1.3 percent and 2.3 percent, respectively, compared to the prior year quarters.

Prior to the second and third quarters of 2010, the last quarter with a noticeable increase in net premiums was the second quarter of 2007, with a 2.1 percent increase.

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