Market Common Sense

It’s amazing how just days after a disaster, some will jump to wild conclusions about the potential impact on premium rates. Those of us in the industry know that many forces affect the price and availability of insurance. The insurance industry is cyclical and rates and profits fluctuate depending on the phase of that cycle. While it’s true that the property/casualty industry’s profits may still be reasonably strong, it’s also true that profitable years are needed to offset years where profits are minimal or the industry suffers a loss, as all too recent history shows us. For example, in 2005 losses from Hurricanes Katrina, Rita and Wilma wiped out the profits of some insurers and forced others to raise additional capital. Further, insurers cannot arbitrarily raise rates to make up for past losses. So as the full impact of the California wildfires becomes clearer, I.I.I.’s issues update on financial and market conditions may be a helpful information tool.  

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