2002 Was Good, Bad & Ugly
This edition marks the end of another difficult year for both sellers and buyers of insurance, although the news wasn't all bad.
For insurers, the good news is that net written premiums rose 13.6 percent through three quarters, while catastrophe claims and the net underwriting loss fell dramatically, dropping the combined ratio from 114.4 to 104.9. Net income hit $9.3 billion, compared to a $2.6 billion loss at this time last year.
The bad news is that surplus fell another $16.3 billion–5.6 percent–due to capital losses, on top of a $36.1 billion decline through last September. Also, insurers are going to have to do a lot better than 104.9–probably into the low-90s–to attract growth capital.
The good news for insurers is that they have a federal terrorism backstop. The bad news is they must offer terrorism coverage, figure out how to price it, and take some heavy hits if there's another attack.
For buyers, the bad news is that premiums are skyrocketing for shrinking limits and coverage. The good news is they're still not paying as much as they did in the early-to-mid-1990s. (That's small comfort, perhaps, but we did say this was a bad year.)
The good news for buyers is that insurers must offer terrorism coverage. The bad news is there is no telling how much it will cost, and whether buyers will be able to afford itor be able to afford to decline it. (Imagine the D&O liability implications of refusing to buy terrorism coverage, and then suffering an uninsured loss in an attack!)
Will 2003 be any better? Only if the bears on Wall Street return to their hibernation, if there are no terrorism attacks, earthquakes or hurricanes, and if Congress finally passes tort reforms to make the liability system more predictable and affordable.
The only certainty is that National Underwriter will keep reporting the news, good and bad, and then help you make sense of its implications. We wish all of our readers and advertisers a very happy and successful New Year!
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, December 30, 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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