Last year's devastating hurricane season hit insurers with a $4.2 billion underwriting loss, according to Weiss Ratings Inc.
The loss compares to the record profit of $6.4 billion reported by the industry in 2004, the first such profit in 28 years.
Solid performance in the equity market and rising interest rates helped compensate for the underwriting loss, Weiss said.
Property-casualty insurers reported a 17.2 percent rise in investment income, from $42.4 billion in 2004 to $49.7 billion in 2005, the Jupiter, Fla.-based ratings service reported. Capital gains jumped 31.6 percent to $11.7 billion, compared with the $8.9 billion reported one year ago.
Consequently, despite the catastrophic losses associated with the most active hurricane season on record, insurers earned $46.7 billion in 2005. The industry managed a 13 percent profit increase, although the growth was considerably less than the industry reported in 2004 when net income surged 28 percent to $41.3 billion, Weiss said.
"Property and casualty insurers transferred much of their risk to reinsurers, who now bear the burden of the insured losses," said Weiss Vice President Melissa Gannon.
But with more intense hurricane seasons projected, both primary insurers and reinsurers face an uphill battle to improve underwriting performance, leaving many consumers in high-risk areas with little relief from rising premiums, Ms. Gannon added.
Two consecutive hurricane seasons with record losses have dramatically slowed the growth of the industry's capital and surplus, which rose only 3.9 percent to $515 billion as of December 31, 2005, compared with year-end 2004 when insurers registered an 11.9 percent increase, Weiss reported.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.