Disasters Hit Insurance Industry July 1st, 2007
Natural disasters in 2005 – most notably Hurricane Katrina in late-August – will result in record catastrophe losses in the insurance industry, according to a national survey released in February, 2006.
While these losses will weigh heavily on insurance executives’ decisions in 2006, analysts expect the industry to “spring back”, noted the Insurance Information Institute’s “Groundhog Forecast for 2006.”
“The average forecast calls for an increase in net written premiums of 3.8 percent in 2006, up from an anemic 1.0 percent estimated for 2005. The 3.8 percent increase in premium growth forecast for 2006 represents diminished expectations for the post-Katrina hard market,” noted Dr. Robert P. Hartwig, CPCU, Senior Vice President and Chief Economists for the institute.
“The spike in premium growth in 2006 is a direct result of analyst expectations that record catastrophe losses in 2005, totaling $56.8 billion, have severely crimped capacity and caused insurers to reassess risk in catastrophe-prone regions of the United States.” according to the forecast.
Insurance executives should also note that first-quarter predictions call for an expected demand for insurance and reinsurance, which will likely lead to a “mini-hard market”, in turn driving the costs for these types of coverage up. The highest demand, and thus the greatest expected cost increases, will come in the property insurance and property catastrophe reinsurance markets.
“Expectations for a hard market in 2006 — at just 3.8 percent — are quite muted relative to recent historical growth in premiums.” the forecast warns insurance executives.
Career Corner Article Series
Career Corner Articles Home
Management Matters Article Series
Management Matters Articles Home
Industry Trend Article Series
Industry Trend Articles Home