Almost a year ago we looked back on 2008 and remarked on three things: the financial state of the insurance industry, the corresponding software market, and the “arrival” in our market of giant software vendors. As 2009 draws to a close, I'd like to take another look at the changes in our marketplace.

Industry Finances

The P&C insurance industry is weathering the recession relatively well. As we observed last year, three important facts underpin the industry's health. First, most of the premiums spent in P&C are nondiscretionary; while both households and business have trimmed coverage, with the exception of certain markets where special conditions pertain (e.g., mortgage insurance), the industry's top line has held up far better than other segments, such as life insurance. Second, two thirds of the aggregate P&C investment portfolio is in high-grade industrial, municipal, and government bonds, which significantly mitigated capital losses. Third, as a result of recent catastrophe experience and reserve-strengthening, the industry entered the recession significantly less leveraged and remains capable of sustaining itself through an extended tough period.