Hartwig: U.S. Budget Deal 'Positive' for Insurance Industry

The bipartisan budget deal heading to the House may indirectly improve the U.S. insurance landscape, according to Robert Hartwig, president of the Insurance Information Institute. 

“The budget deal is an unambiguous positive for the U.S. economy in general and P&C insurance specifically,” Hartwig tells PC360. “The October shutdown took a toll on business and consumer confidence, which translates into lower consumer spending, reduced investment activity by businesses and less hiring. All of these are negatives for P&C insurers because they reduce the growth rate of new exposures [such as] property, liability, and for workers’ compensation payroll exposures.” 

The two-year bill, proposed by House Budget Committee Chairman Paul Ryan, R-Wis. and Sen. Patty Murray, D-Wash., is an $85 billion agreement the politicians say mostly aims to avoid another government shutdown. 

Hartwig says the timeframe should make greater inroads to reducing uncertainty rather than a deal “that merely kicked the can down the road for a few more months.” 

A statement from Ryan says the bill would provide $63 billion in sequester relief over two years, split evenly between defense and non-defense programs, and would reduce the deficit by between $20 and $23 billion, although news reports say this would occur over the next decade.

 “The deal restores some federal spending, which will bolster the economies of certain states and help offset weaknesses associated with sequestration,” says Hartwig. “Agents located in areas with exposure to large defense contractors or other economic dependencies on federal spending had reported a slowdown in business.”

The I.I.I. says the top states dependent on government spending are Maryland, Virginia, Hawaii, Arkansas and New Mexico.  

 “The deal will reduce investor uncertainty and should therefore have a beneficial impact on financial markets,” Hartwig concludes.