National Underwriter - January 23, 2012

At Joint Industry Forum, Execs Express
Optimism About 2012 Profits

BY CHAD HEMENWAY

THREE-QUARTERS of executives urveyed at the Property/Casualty Insurance Joint Industry Forum in New York say the industry can expect an upswing in profitability in 2012.

Profits will improve in most P&C lines, according to the survey, with 63 percent saying there will be an improvement in Auto lines and 67 percent expecting an uptick in profits in Homeowners’ lines.

More than 70 percent of the nearly 250 surveyed respondents expect to see improvement in commercial lines, but the majority (55 percent) say not to look for any significant improvement in the Workers’ Compensation line.

The Insurance Information Institute (I.I.I.) survey was conducted at the forum on Jan. 10.

According to Steven Weisbart, senior vice president with I.I.I., the U.S. economy is expected to grow at a little over a 2 percent annual rate, net of inflation.

“The industry is well capitalized to provide additional coverage and to pay claims under it without difficulty,” Weisbart says in statement. “Rates will be determined, as they should be, by state and local-level market conditions, recognizing the impact of inflation on claims and the

More than two-thirds of P&C
leaders expect higher premium growth
in 2012. Just 2% believe premium
growth will be negative this year.

effect of lower investment income than the
industry has earned in prior years.”
More than two-thirds of P&C leaders
expect higher premium growth in 2012.
Just 2 percent believe premium growth will
be negative this year.

Though 78 percent of those surveyed say the industry’s combined ratio will be lower in 2012 (it was 108.2 after nine months in

2011), not many think consolidation among insurers and reinsurers will be a factor in the reduction. More than 70 percent say they do not expect an increase in consolidation.

Natural catastrophes obviously played a large role in knocking down insurers’ profits in 2011, but low interest rates and dim investment gains also contributed.

Just 19 percent say interest rates will

Profits will improve in most P&C
lines, according to the survey,
with 63% saying there will be an
improvement in Auto lines and 67%
expecting an increase in profits in
Homeowners’ lines.

rise in 2012, while 78 percent say interest rates will stay flat. Turning to the equity markets, 75 percent expect an up year.

MCRAITH TALKS FIO

Also in the survey, two-thirds of industry executives say it’s too early to tell whether the Federal Insurance Office (FIO) is off to a good start.

The responses came as FIO Director Michael McRaith spoke at the forum, saying he’s aware of the anxiety that his office will be asking for duplicate data, bogging the insurance industry down in paperwork for what has been perceived as, potentially, an additional regulatory authority.

Before some of the industry’s most
powerful chief executives and trade
associations, McRaith reiterated that
FIO “is not a regulatory authority” and
that concerns that the office will ask for
duplicate data “are not well-founded.”
FIO is required to seek information
from a public source first, he said.

True, FIO has subpoena power, and
McRaith said its ability to do so is “an
important component of our authority,”
but the office will only seek to exercise its
power “as a last resort to obtain critical
information” after a company refuses to
offer the information.