REVISED III Survey: Slowing Growth In 2003
By Michael Ha
NU Online News Service, Feb. 3, 4:27 p.m. EST? A majority of stock analysts and industry professionals in a survey panel believes insurers will see continued improvement in their combined ratio this year- even as premium growth starts to cool, the Insurance Information Institute reported.
In its annual "Groundhog Forecast" survey, the New York-based trade group found that the average forecast calls for an increase in net written premiums of 12.2 percent in 2003, resulting chiefly from increased prices and, to a lesser extent, higher demand.
The increase is still high by recent historical standards, the Institute stated, but it represents a deceleration from the 14 percent average gain estimated for last year.
"In terms of premium growth, the cycle has probably peaked," said Robert Hartwig, senior vice president and chief economist at III.
"But the rate of the growth is only half the story. The question is, how long will the hard market last? The economics for the hard market are so compelling that there is no way it can end without hurting some insurers," Mr. Hartwig warned.
On the other hand, the combined ratio for 2003 is projected to be 103.2, a decrease from an estimated 106.3 from last year and well below the terrorism-impacted 115.7 result in 2001. If the forecast proves correct, it would be the industry's second-lowest combined ratio in nearly two decades, III stated.
"The survey does show an improvement in the combined ratio. It shows a movement in the right direction," Mr. Hartwig told National Underwriter. "But in the third year of the hard market, the combined ratio is still unacceptably high. It has to be down below 95 before insurers can turn in a reasonable rate of return," he noted.
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