P/C Industry Resilient Even in Face of Disaster

The property/casualty insurance industry is, and will remain, extremely well capitalized and financially prepared to pay very large scale losses in 2016 and beyond, according to Insurance Information Institute (I.I.I.) president Dr. Robert Hartwig and chief economist Dr. Steven Weisbart.

In their commentary on the industry’s 2015 year end results, Drs. Hartwig and Weisbart note that overall industry capacity remains near an all-time record high.

“Overall industry capacity (policyholder surplus) slipped slightly to $673.7 billion as of December 31, 2015, but was still extraordinarily strong, as measured by a premium-to-surplus ratio of 0.76—virtually the strongest it has ever been.”

They go on:

“Thanks to a surging stock market until 2015, policyholders’ surplus has generally continued to increase with the end of the Great Recession and three consecutive years without large-scale catastrophe losses. But the lack of stock gains in 2015 ended (or at least stalled) this trend.”

At $673.7 billion as of December 31, 2015, policyholders’ surplus was down $1.5 billion or 0.23 percent from year-end 2014.

The bottom line is that the industry is extremely well-capitalized, even in the face of disaster.

As the I.I.I. reports:

“The fact that the P/C industry was able to rapidly and fully recoup its losses to surplus even in the event of disasters like superstorm Sandy (which produced $18.8 billion in insured losses in 2012) is continued evidence of its remarkable resilience in the face of extreme adversity.”

Other takeaways of the industry’s 2015 year end results: moderate profits in 2015, as measured by a return on average surplus of 8.4 percent, virtually the same as in 2014; modest premium growth (net written premiums in 2015 crossed the half-trillion-dollar mark to $514.0 billion, although the rate of increase slipped slightly to 3.4 percent growth from 4.2 percent in 2014); and a below-100 combined ratio for the fourth straight year (97.8 in 2015, compared with 97.0 in 2014).

The industry results were released by ISO, a Verisk Analytics company, and the Property Casualty Insurers Association of America (PCI).

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