Surprise! Despite Threats,
Industry Bullish On Future
The Property/Casualty Joint Industry Forum is like a family reunion. All the heads of the major associations and top execs of insurers and reinsurers gather to touch base, swap gossip, and try to get a handle on where the year is heading.
Last year, the headline on my Jan. 20 column, "Its My Party, And Ill Cry If I Want To," really captured the oddly pessimistic mood of the meeting. Despite soaring premiums and skyrocketing net income, "the faces were mostly glum, and the humor was of the gallows variety," I observed.
Insurers were worried about an unsatisfactory return on equity, a volatile stock market, asbestos reserve boosts that "sent a chill through the crowd," a reinsurance market in turmoil, increased pressure from rating agency and stock analysts, and skepticism about the prospects for desperately needed tort reforms at the state and federal level.
Its funny, but despite the fact that all of the above challenges still cast a shadow over the industry, this years crowd was defiantly upbeat in their outlook for the markets short-term future. The fact that double- and triple-digit rate hikes are the exception rather than rule these days did not darken their outlook.
Perhaps feeling their pockets bulging for a change (industrywide net income for the first three quarters of 2003 more than tripled to over $21 billion) and seeing Wall Street booming again overcame longer-term concerns and bolstered everyones spirits.
Indeed, a survey of the nearly 250 industry bigs in attendance found that just over half expect the hardening of the commercial market to continue this year (perhaps just not as dramatically). Sixty-seven percent predicted higher profits in commercial lines. Even in the problematic workers compensation arena, 58 percent expect higher profitability. (On personal lines, 64 percent foresee higher profits on auto insurance, against 62 percent for homeowners.)
In addition, 82 percent expect a lower combined ratio in 2004. (The benchmark figure fell close to the magic 100 level during the first three quarters last year, down from 105 the year before.)
The industrys leaders are just as bullish about the stock market as they are about the insurance markets, as 98 percent said they expect another "up year" in equities. Eighty-one percent also expect interest rates to rise, which would boost investment income for carriers.
These giddy good feelings about the future did not extend to the legislative arena, unfortunately. Nearly two-thirds said they do not expect Congress to pass, and President George W. Bush to sign, a "meaningful" class action reform bill this year. The same percentage predicted no legislation would pass to "help contain the current asbestos crisis." Sixty-seven percent believe Congress wont extend the Terrorism Risk Insurance Program.
There were also some jitters about the future in that 60 percent expect more rating agency downgrades than upgrades this year, while 71 percent predict more mergers and acquisitions.
Oh, yeah. Ninety-four percent believe President Bush will be reelected. I couldnt help but wonder if the other six percent misunderstood the question or mistakenly checked the wrong box. This aint exactly Howard Deans crowd.
Reproduced from National Underwriter Edition, January 16, 2004. Copyright 2004 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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