精东影业

Property/Casualty Insurers Remain Solvent and Well-Capitalized Amid Economic Downturn

INSURANCE INFORMATION INSTITUTE听
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NEW YORK, May 12, 2009 鈥� Although the economic turbulence had a significant adverse impact on the financial performance of U.S. property/casualty (P/C) insurers last year, the industry nonetheless remains strong at the start of the hurricane season, which is only weeks away, according to the 精东影业 Information Institute (I.I.I.)

鈥淭he basic explanation for the resilience and strength that P/C insurers have demonstrated during the current and countless past financial crises are attributable to a deeply entrenched and conservative operating philosophy that leads directly to superior risk management strategies,鈥� wrote Dr. Robert Hartwig, an economist and president of the I.I.I., in his year-end 2008 analysis of the industry鈥檚 financial performance. 鈥淚nsurers necessarily run their business under the assumption that every day is a potential doomsday鈥攂ecause it is.鈥�

Despite sizable losses in their investment portfolio, P/C insurers ended 2008 well capitalized by historical standards and prepared for the 2009 hurricane season, which starts on June 1. Dr. Hartwig pointed out that the ratio of premiums written to available surplus, a simple measure of financial leverage, stood at 0.95 as of December 2008. This meant that for every 95 cents in premium written insurers had $1 in capital (surplus) on hand as 2008 concluded. By this measure the industry鈥檚 capital position is stronger now than it has been before any of the major catastrophic events over the past quarter century, including the September 11, 2001, terrorist attack (which resulted in insured losses of $32.5 billion) or Hurricane Katrina in 2005 (with $41 billion in insured losses).

Moreover, Dr. Hartwig noted that P/C insurers remained profitable in 2008, earning $2.4 billion in net income after taxes. That figure was down $60.1 billion, or 96.2 percent, from the $62.5 billion profit in net income after taxes that P/C insurers realized in 2007, largely because of the poor investment environment in 2008 and higher losses on insurance operations. The latter was driven by $26 billion in insured catastrophe losses. Indeed, one event, September 2008鈥檚 Hurricane Ike, accounted for about 40 percent of the year鈥檚 overall catastrophe losses. Ike was the fourth-most expensive hurricane in U.S. history.

鈥淭he third quarter is traditionally the most expensive for insurers due to the fact that the peak of hurricane season occurs in September,鈥� Dr. Hartwig stated. 鈥淵et despite a 12 percent year-to-year drop in the P/C industry鈥檚 capacity in 2008 as compared to 2007, insurers currently hold more than $400 billion in capital in the form of policyholder surplus for whatever events the future might hold.鈥�

The I.I.I.鈥檚 online Facts and Statistics section offers a historical perspective on U.S. hurricanes as well as market share data with details on who writes property insurance in the U.S.鈥檚 most hurricane-prone states.

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