P/C Industry Financials and the Catastrophe Factor

The presence or lack of catastrophes  is a  defining event when it comes to the financial state of the U.S. property/casualty insurance industry.

At the 2014 Natural Catastrophe Year in Review webinar hosted by Munich Re and the Insurance Information Institute (I.I.I.), we can see just how defining the influence of catastrophes can be.

U.S. property/casualty insurers had their second best year in 2014 since the financial crisis — 2013 was the best — according to estimates presented by I.I.I. president Dr. Robert Hartwig.

P/C industry net income after taxes (profits) are estimated at around $50 billion in 2014, after 2013 when net income rose by 82 percent to $63.8 billion on lower catastrophe losses and capital gains.

P/C profitability is subject to cyclicality and ordinary volatility, typically due to catastrophe activity, Hartwig noted.

In 2014, natural catastrophe losses in the United States totaled $15.3 billion, far below the 2000 to 2013 average annual loss of $29 billion, according to Carl Hedde, head of risk accumulation, Munich Re America.

Lower catastrophe losses helped p/c industry ROEs in 2013 and 2014, relative to 2011 and 2012, and helped the p/c industry finish 2014 in very strong financial shape, despite the impact of low interest rates on their investments, Dr. Hartwig noted.

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Overall industry capacity, as measured by policyholder surplus, is projected to have increased to $675 billion in 2014 — a record high.

The industry’s overall underwriting profit in 2014 is also estimated at $5.7 billion, on a combined ratio of 97.8.

Underwriting results in 2014 and 2013 were helped by generally modest catastrophe losses, a welcome respite from 2012 and 2011 when the industry felt the effects of Hurricane Sandy and record tornado losses, Dr. Hartwig noted.

Matthew Sturdevant of the Hartford Courant has a good round-up of the other webinar presentations here.

 

 

 

 

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