Given the severity of the economic downturn, the U.S. property/casualty insurance industry has performed remarkably well in recent years, a group of industry experts observed in a panel discussion.
The insurance industry’s performance was especially impressive held up against other businesses with asset risk exposure, such as banks and brokerages, noted panelist Joseph Guastella, partner, Insurance Industry, Strategy and Operations, Deloitte. “If you look at the performance of the property/casualty industry versus other financial sectors, it has been a stellar performance,” said Guastella, speaking at the14th annual Property/Casualty Insurance Joint Industry Forum in New York.
The industry performance was credited to a mix of effective risk management practices prudent supervisory oversight of insurers, and a bit of luck, as the 2009 hurricane season passed without causing major damage.
This performance also extended to other parts of the insurance industry, noted Scott Harrington, Professor of Insurance and Risk Management at the University of Pennsylvania’s Wharton School. “One of the great untold stories of the last year is how well the insurance sector in general has done,” he said. “Even the life companies, given what happened in residential mortgage-backed securities and asset markets, I think the performance of the overall sector has been truly remarkable.”
Yet, the panel’s moderator, Peter Miller, president, American Institute for CPCU, pointed out that cumulative net premiums written were down more than 4% in 2009, the third consecutive year of decline. Likewise, Jay Gelb, director, Barclays Capital agreed insurers still have ample reason for concern, adding that the economic downturn is impacting commercial insurers more than personal lines carriers because commercial insurers’ fortunes are tied more closely to the slowdown in new business formation, payroll declines and reduced construction spending
“The property/casualty insurance industry is not going to see positive growth any time soon,” Gelb said. “My estimate is that the industry will probably show a decline in 2010, as well, which would be the worst track record of growth for the industry since the Great Depression.”