2009 Joint Industry Forum

Insurance Industry Leaders Convinced Financial Crisis Not Over, I.I.I. Survey Finds

Loretta Worters (Insurance Information Institute)

NEW YORK, January 14, 2009 — Leaders of the property/casualty insurance industry expect the worst of the financial crisis is still ahead, according to a survey conducted by the Insurance Information Institute (I.I.I.) at its 12th annual Property/Casualty Insurance Joint Industry Forum, held here.

Sixty-six percent of executives in the property/casualty industry expect financial woes to persist.

Looking at the industry’s financial performance, a majority of industry leaders believe the market will soften in most property/casualty lines. Broken down by lines of insurance, 52 percent of respondents do not believe there will be an improvement in personal auto; 55 percent do not expect an improvement in homeowners; 74 percent of respondents do not expect an improvement in workers compensation; and 62 percent of respondents do not expect an improvement in commercial lines.

As compared with 2008, 59 percent of respondents believe the combined ratio will be higher in 2009. Forty-one percent thought it would be lower. The combined ratio is a percentage of each premium dollar a property/casualty insurer spends on claims and expenses.

Looking at premium growth, 50 percent of respondents believe that it will remain flat, 33 percent believe it will be negative and 17 percent believe it will be positive.

“Looking forward to 2009, survey participants indicated that the year is likely to see modest premium volume growth at best, owing partly to the weak economy,” said Dr. Steven N. Weisbart, senior vice president and chief economist of the I.I.I. “Low interest rates and a weak investment climate are unlikely to provide a significant source of profit growth for the industry,” he added.

When it comes to whether Congress will approve National Catastrophe Legislation in 2009, the views are based on a belief that other matters will take higher priority. Ninety-three percent of respondents do not think it will occur. In addition, 51 percent of insurance leaders think the push for an Optional Federal Charter will not gain momentum in 2009.

Optimism is also waning on the issue of torts. Sixty-three percent of respondents believe that tort trends will deteriorate in 2009, 32 percent believe they will stay the same and only 5 percent believe they will improve.

On the investment side, 59 percent of industry leaders expect another down year in the equity markets. Seventy-six percent of respondents expect consolidation among insurers and reinsurers.

The majority of insurance leaders—62 percent—expect interest rates to remain flat in 2009, while 29 percent believe rates will rise.

The Property/Casualty Insurance Joint Industry Forum was created to provide leaders from the widest spectrum of the industry with an opportunity to meet with each other in discussion of topics of general interest. Participants included nearly 250 representatives from property and casualty insurance and reinsurance companies and organizations. Of these, roughly 40 percent responded to the survey.

The sponsoring organizations of the Forum represent a wide spectrum of insurance interests and audiences. They include: American Institute for Chartered Property Casualty Underwriters, American Insurance Association, Association for Cooperative Operations Research & Development, Association of Bermuda Insurers and Reinsurers, The Geneva Association for Risk & Insurance Economics, Institute for Business & Home Safety, Insurance Information Institute, Insurance Institute for Highway Safety, International Insurance Society, Inc., ISO, National Association of Mutual Insurance Companies, National Council on Compensation Insurance, National Insurance Crime Bureau, Property Casualty Insurers Association of America and Reinsurance Association of America.

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

For the poll questions and full results, click on the filename below:

JIF Survey Results (PDF)