The insurance industry is expected to see its strongest growth since 2004, according to one industry economist—but he adds that the good news is moderated by consistent large underwriting losses.
Speaking at the International Association of Claims Professionals New York Conference May 31, Steven Weisbart, the Insurance Information Institute’s (I.I.I.) senior vice president and chief economist, told attendees that “the economic picture is brightening” and the industry is “not too far away from reaching a hard market.”
While Weisbart doesn’t expect a full hard-market turn in 2012, the industry will likely exceed A.M. Best’s projection of 3.8 percent growth this year.
The industry’s slow-but-sure climb to a hard market is marked by positive premium growth—but also by increased underwriting losses, he adds.
According to I.I.I., net-written premiums grew 3.3 percent in 2011, a positive gain from 2010, when net-written premiums were only up 0.9 percent. But underwriting losses in 2011 were $36.5 billion, the largest since 2001, Weisbart notes—with the average annual loss from 1980-2011 at $15.25 billion.
Of the 2011 underwriting results, impacted mainly by weather-related losses, Weisbart says: “Incurring consistent, large underwriting losses is not a sustainable business plan in the current investment environment.”
Despite weather-related losses stunting P&C growth, however, the forecast is still positive, he says.
Gross domestic product is growing from low recession-era levels, albeit slowly. The U.S. GDP forecast for annual growth through 2013 is 3 percent but is threatened by uncertainty in Europe as well as planned federal-spending cuts, the expiration of income-tax rate reductions, and the end of some unemployment benefits on Jan. 1, 2013.
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