Insurance Market Report

A recently-released report on the property and casualty insurance industry’s 2009 results indicated that net income fell 59.3% as a result of economic weakness and losses in investment income. This loss, however, was partially offset by improved claims experience with profit on underwriting actually doubling in the first half of the year.

The continuing economic weakness is causing concern at many carriers which have seen premium levels drop as a result of lower sales, payroll and other similar risk exposures. Despite earlier forecasts that the so-called “soft market” in business insurance premiums would be changing, there is little evidence of rising premiums according to industry sources. Insurance carriers buy reinsurance to protect against catastrophic losses on their own books of business. The direction of reinsurance premiums is often a reliable bell-weather for the insureds onto whom these premiums are passed. Most observers believe that reinsurers are setting similar premiums on January 2010 renewals as they did on 2009 renewals.

At this writing, therefore, our corporate clients can expect premium levels to remain constant for the near term with slight variations upward or downward possible only with exceptional claims experience. Since we renew business literally every workday, we are very current with the market players and the premium levels. Please be assured that we will be in touch promptly if there are any radical changes in the current stable picture.

Nonetheless, several long-time insurance company leaders are sure that higher premiums will soon need to be the norm in order to maintain profitability. A recent statement from W.R. Berkley Corporation’s Chairman and Chief Executive Officer William R. Berkley sums up this viewpoint: “At current pricing levels with existing low interest rates, we believe the industry is operating at a net loss on an accident-year basis, and a turn in the cycle is inevitable. We anticipate modest improvement in the economy and a turn in the insurance pricing environment in the first half of next year. We continue to believe that we will meet our objective of a return of 15 percent equity.”