Insurers Have Proven Resilient During Economic Downturn

Industry Remains Well-Capitalized, Despite Sizable Investment, Catastrophe Losses in 2008

INSURANCE INFORMATION INSTITUTE
Contact: Press Offices
New York: 212-346-5500; media@iii.org
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AUSTIN, TEXAS, April 10, 2009—Bolstered by a risk management model that is superior to the one employed by banks, U.S. property/casualty (P/C) insurers have weathered the current global financial crisis with their operating model—the orderly transfer of risk from policyholder to insurer—intact. This has enabled P/C insurers to continue paying claims and sell and renew policies, according to Dr. Robert Hartwig, president of the Insurance Information Institute (I.I.I.), who today addressed the annual gathering of the National Hurricane Conference.

Moreover, Dr. Hartwig noted that P/C insurers remained profitable in 2008, despite financial market turmoil and a deep recession, earning $2.4 billion in net income after taxes. That figure was nonetheless down $60.1 billion, or 96.2 percent, from the $62.5 billion profit in net income after taxes P/C insurers realized in 2007, largely because of the poor investment environment and higher losses on insurance operations. The latter was driven by $26 billion in insured catastrophe losses—the fourth highest total ever.

Nine of the 12 costliest natural disasters in U.S. history, as defined by insured losses, have occurred since 2004, Dr. Hartwig noted, stressing the importance to P/C insurers of maintaining a sizable policyholders’ surplus. Texas accounted for about 40 percent ($10.6 billion) of the total insured catastrophe losses of $26 billion in 2008, largely because of September 2008’s Hurricane Ike, the fourth-most expensive storm in U.S. history and one which continues to have significant economic ramifications in southeast Texas.

Beyond responding to hurricanes Ike and Gustav in Texas and Louisiana last year, P/C insurers also financed the economic recovery following 35 other catastrophes in 2008, all of which resulted in insured losses totaling at least $25 million. Those disasters included tornadoes, wildfires, wind and hail storms. Natural catastrophes have not abated in 2009, with a volcanic eruption in Alaska,the overflowing of the Red River in North Dakota and tornadoes last month in Georgia causing tens of millions of dollars of damage.

The full presentation can be downloaded from the Insurance Information Institute’s Web site.

The I.I.I. is a nonprofit, communications organization supported by the insurance industry.