Insurers in recent years have pointed to the low-interest-rate environment when making their case for rising rates, but ALIRT Insurance Research wonders whether this is entirely accurate, at least for commercial-lines insurers.
The firm, in an analysis of Q1 2014 results, says commercial- and personal-lines insurers saw a spike in net-investment income from 2005 to 2007, thanks to strong operating income. Net investment income fell in 2008-2009, during the financial crisis, but ALIRT says it has since rebounded "and is slightly higher than 2007 levels for the commercial-lines segment."
ALIRT looks at the industry's ratio of investment income to net-earned premium flow over the last 16 years. For personal lines, the ratio has dropped below the 16-year average starting six years ago and has continued falling since then. For commercial lines, though, the ratio only dipped slightly under the 16-year average in 2012 and recovered some in 2013.
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