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U.S. Capital Cushion Could Decline $42 Billion in Third Quarter

To arrive at the estimated 8-percent dip, Towers Perrin took into account the clash of equity and credit-related losses on asset portfolios; catastrophe losses resulting from an active hurricane

By Christina Bramlet | Updated on October 22, 2008

The U.S. property and casualty industry’s third-quarter statutory surplus could shrink as much as $42 billion from the beginning of the year, according to projections by a global consulting firm.

To arrive at the estimated 8-percent dip, Towers Perrin took into account the clash of equity and credit-related losses on asset portfolios; catastrophe losses resulting from an active hurricane season; and an anticipated spike in D&O liability claims. Moreover, the firm says that if the stock market doesn’t recover from steep losses precipitated in recent weeks by the financial crisis, the surplus decline could approach $80 billion — or 15 percent — by the end of the year.

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