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.
Reported quarterly by U.S.-based regulated insurance companies, statutory surplus is a conservative measure of the capital cushion held by insurers to protect policyholders in the event of adverse results. Various trade associations compile and publish pertinent industry-wide figures.
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