Surplus Down Two Years Straight: ISO
The surplus level of the property-casualty industry not only fell 8.7 percent in 2001, but the drop gave the industry its first back-to-back surplus decline since 1984, according to a recently-published report.
The result, which followed a 5.1 percent surplus dip in 2000, is among many detailed in "Insurer Financial Results: 2001," published by the Insurance Services Office in Jersey City, N.J.
Besides providing analysis of several key components of the industrys first net loss after taxesamounting to $7.9 billionISO reported that the $27.7 billion surplus decline in 2001 was the largest since 1974, when surplus dropped 23.9 percent.
With the net loss, components of the 2001 surplus drop included $17.7 billion in unrealized capital losses and $10.9 billion in dividends to shareholders. The report also noted that accounting changes made as a result of the National Association of Insurance Commissioners Codification of Statutory Accounting Principles caused surplus to be $2.5 billion higher than it would have been without Codification.
A bright spot on the industrys performance picture was an 8.1 percent climb in net written premiums. But not all lines experienced similar growth, ISO reported, noting that while fire premiums jumped 18 percent, workers compensation premiums rose only 4 percent. The report speculated that the weakness in workers comp might reflect a movement to residual markets that isnt captured in ISOs data.
The report also includes 2001 and historical information on combined ratios (with and without catastrophe losses and asbestos reserves), investment gains and insolvencies, as well as a preliminary analysis of reserve adequacy.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, July 22, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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