I.I.I. Forecast: P-C Combined Ratio 99 In '05
NU Online News Service, Nov. 19, 3:07 p.m. EST?In 2005 the property-casualty insurance sector will realize its first underwriting profit since 1978 even as the industry-wide net written premium growth slows to 3.4 percent, the Insurance Information Institute said. [@@]
According to I.I.I.'s "Early Bird Forecast," the industry's combined ratio is projected to be 99, down from the 100 estimated for 2004 and the 100.1 recorded in 2003.
The forecast would represent a vast improvement over the terrorism-impacted 115.7 result in 2001, and it would also mark the first underwriting profit in the property-casualty insurance industry since 1978.
There is also a chance that the current -year 2004 would show an under-100 combined ratio, even though the current I.I.I. projection stands at a breakeven point.
Had catastrophe experience in 2004 been "normal," without $20.5 billion in estimated losses from four hurricanes, the year's combined ratio would have been in the neighborhood of 95?its lowest level since 1972, I.I.I. pointed out.
On the industry's premium growth, I.I.I. said the average forecast calls for a 3.4 percent increase in net written premiums in 2005, down from an estimated 4.8 percent in 2004.
In contrast to previous years, when gains were mostly the result of higher rates, the sharp weakening in the pricing environment over the past year means that current gains are more directly attributed to higher exposure growth and higher demand related to the current economic recovery.
Overall, the I.I.I. survey shows the p-c industry's ongoing recovery from its worst-ever performance in 2001 ran into headwinds this year, as the four storms that struck the southeast coast transformed what would have been the industry's best year in decades into a barely breakeven performance.
In 2005, I.I.I. noted, analysts expect little change from 2004, though on a catastrophe-adjusted basis the cyclical deterioration in underwriting performance will begin to further materialize.
The I.I.I. Early Bird Forecast is available online at "http://www.iii.org/media/industry/financials/forecast2005″
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