Profitability in the property/casualty insurance industry rebounded sharply in 2012, despite $35 billion in insured losses from catastrophes, the majority of those from superstorm Sandy, according to I.I.I. president Dr. Robert Hartwig.
In his commentary on the industryÃ¢â‚¬â„¢s 2012 year-end results, Dr. Hartwig says that the improvement was propelled chiefly by a growth in premiums and aÃ‚ drop in both private insurer catastrophe and noncatastrophe related loss and loss adjustment expenses.
The industryÃ¢â‚¬â„¢s overall net income after taxes (profits) surged by 72.3 percent in 2012 to $33.5 billion from $19.5 billion in 2011, pushing the industryÃ¢â‚¬â„¢s return on average surplus to 5.9 percent for the year, up from 3.5 percent in 2011.
Despite paying $35 billion in catastrophe losses Ã¢â‚¬“ the fourth highest year on record on an inflation adjusted basis Ã¢â‚¬“ the industry benefited from a 4.3 percent jump in net written premiums, nearly a full point above the 3.4 percent gain a year earlier.
This was the strongest growth so far recorded in the post-crisis era, according to Dr. Hartwig.
In another sign of strength, overall industry capacity (policyholdersÃ¢â‚¬â„¢ surplus) rose to a record $586.9 billion as of December 31, 2012 Ã¢â‚¬“ up $33.1 billion or 6.0 percent from $573.0 billion as of year-end 2011.
Dr. Hartwig noted:
The fact that the industry was able to rapidly and fully recoup its losses from 2011 and reach a new record high in terms of capital strength in 2012 despite Sandy is further evidence of the P/C insurance industryÃ¢â‚¬â„¢s remarkable resilience in the face of extreme adversity.
The bottom line is that the industry is, and will remain, extremely well capitalized and financially prepared to pay very large scale losses in 2013 and beyond despite the fact that insurers have paid catastrophe losses in each of the past two years that are more than 40 percent higher than the $23.9 billion average over the past decade.”
The industryÃ¢â‚¬â„¢s results were released by ISO and the Property Casualty Insurers Association of America (PCI).