Insurers weather the financial storms of 2008 Issues
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Copyright 2008 Crain CommunicationsAll rights reserved Business Insurance
29 December 2008 Edition: 2009 Market Sourcebook
INSURER TOPICS; Pg 48
976 words
Insurers weather the financial storms of 2008, Questions & Answers
Robert Hartwig is president and chief economist at the New York-based Insurance Information Institute. He also served as senior economist at Swiss Reinsurance Corp. in New York and the National Insurance Inc Boca Raton, Fla. Most recently, Mr. Hartwig spoke with insurance companies on the condition of the property or the insurance industry crash in late 2008.
Q: How is commercial property / insurance industry ready to fight against the financial crisis in 2008?
A: There are two things here: there is the financial crisis and there is a recession.
This is the case with any evidence that the commercial insurers' capacity growth will be somewhat tied to the fortunes of the whole economy. After all, growth in premiums in the framework will be determined by the level of employment, the number of trucks (for example) that are produced and plants that are expanded and a variety of factors. But it is on the margin. (And) the commercial insurers have suffered over many years of recession and days. Unlike, say, houses or different car manufacturers, insurers are able to continue to earn renewal premiums on existing property or outstanding debts or work. ... The vast majority of premiums are derived so that renewals and help temper the decline in premiums than commercial insurers would otherwise have seen. Most of lower premiums than commercial insurers have seen in 2007 and 2008, moreover, are associated with the underwriting cycle, in other words, with rates, and not with the economic slowdown . And that was the case historically, not just the most recent.
In terms of the financial crisis, insurers are designed so that they can withstand the stock market crashes, the peak of inflation, low interest rates, what moves the market up or down low. But this time we had one of the largest drops in the stock market in recent decades, we have pushed interest rates at low levels, although the credit is not part of the structure of insurers' capital, to an appreciable extent, it has caused much turmoil in global markets. Thus, it presents new challenges. And it is true that insurers are among the largest institutional investors in the world, have had exposure to falling asset prices, including in some cases, some of the toxic assets.
And then ... they had to take write-downs on the value of certain assets that are difficult to assess today, even if they are not necessarily compromised, due to market accounting rules. So, this has caused capital in industry to decrease fairly rapidly to their peak in 2007.
Thus, insurers have taken hits on their investment portfolio, but at the same time, the industry overall remains well capitalized, has strong notes. ... (The insurance industry) is open for business, is writing new policies, is in the claims, is the development of new products and, in fact, is looking for ways to develop and not trying to diminish, as banks. So there is no liquidity crisis in the insurance industry. There is no crisis of confidence in the insurance industry. Yes, we took a bruising in the investment markets, as everyone has. But insurers are not operating model which involves a high degree of leverage or debt, as he did for banks and investment banks.
Q: What are the prospects for the insurance industry in 2009? What is commercial insurance buyers should expect to renewals?
A: As we prepare for 2009, we see a situation where the capital in the industry have been reduced, both for insurers and reinsurers, and we begin to see the price of commercial insurance have started the business I do not want to grow rapidly; I just want to say they are not falling over or they are flat, perhaps small increases ... not ... (as) in 2000 or 2001, where price increases have been proceeding at a pace to double digits.
Q: So, in 2009, you expect a stronger market, but not as dramatic as in the years 2000 and 2001?
A: That's where the market is heading now. ... Insurers are seeking to have the same respect for the obligations in terms of insured losses, but do so in an environment where investment returns are much less generous than they were. So this means that the burden of proof is on the creation of the underwriting profits and the means to ensure that the price is more precisely tailored to the risks that we assume that possible. Because the contribution to the result of investment gains is obviously declined sharply in 2008 and we do not know if 2009 will be a better option. But what we know is that the magnitude of a disaster that could happen in 2009 is at least as important as it was in 2008.
Q: If customers are concerned about the financial security of their insurers?
A: I think it is always prudent insurance buyers use agents or brokers to provide information on the safety of the company or companies with which they are placing the company. ... But overall the insurers I'm talking about the insurance subsidiaries of companies, I do not speak of AIG Financial Products is that we have heard of the rules (is that) the business remain strong they remain healthy, they re open for business, and they are paying claims.
Q: What were the most important events of the commercial property / insurance industry accidents in 2008?
A: A return to more natural disaster losses with hurricanes that we had on the Gulf coast of Mexico this year. ... (And) I think it is significant (which) is not something happened: the democratically controlled Congress this year has not produced a significant tort reform, and there was that time that May it erode the tort reforms that were adopted in recent years. This could obviously be very expensive for buyers of commercial insurance to the line.
Art Credit: Robert Hartwig
30 December 2008
Copyright © 2009 LexisNexis, a division of Reed Elsevier Inc.. All rights reserved
Terms and Conditions Privacy Policy
29 December 2008 Edition: 2009 Market Sourcebook
INSURER TOPICS; Pg 48
976 words
Insurers weather the financial storms of 2008, Questions & Answers
Robert Hartwig is president and chief economist at the New York-based Insurance Information Institute. He also served as senior economist at Swiss Reinsurance Corp. in New York and the National Insurance Inc Boca Raton, Fla. Most recently, Mr. Hartwig spoke with insurance companies on the condition of the property or the insurance industry crash in late 2008.
Q: How is commercial property / insurance industry ready to fight against the financial crisis in 2008?
A: There are two things here: there is the financial crisis and there is a recession.
This is the case with any evidence that the commercial insurers' capacity growth will be somewhat tied to the fortunes of the whole economy. After all, growth in premiums in the framework will be determined by the level of employment, the number of trucks (for example) that are produced and plants that are expanded and a variety of factors. But it is on the margin. (And) the commercial insurers have suffered over many years of recession and days. Unlike, say, houses or different car manufacturers, insurers are able to continue to earn renewal premiums on existing property or outstanding debts or work. ... The vast majority of premiums are derived so that renewals and help temper the decline in premiums than commercial insurers would otherwise have seen. Most of lower premiums than commercial insurers have seen in 2007 and 2008, moreover, are associated with the underwriting cycle, in other words, with rates, and not with the economic slowdown . And that was the case historically, not just the most recent.
In terms of the financial crisis, insurers are designed so that they can withstand the stock market crashes, the peak of inflation, low interest rates, what moves the market up or down low. But this time we had one of the largest drops in the stock market in recent decades, we have pushed interest rates at low levels, although the credit is not part of the structure of insurers' capital, to an appreciable extent, it has caused much turmoil in global markets. Thus, it presents new challenges. And it is true that insurers are among the largest institutional investors in the world, have had exposure to falling asset prices, including in some cases, some of the toxic assets.
And then ... they had to take write-downs on the value of certain assets that are difficult to assess today, even if they are not necessarily compromised, due to market accounting rules. So, this has caused capital in industry to decrease fairly rapidly to their peak in 2007.
Thus, insurers have taken hits on their investment portfolio, but at the same time, the industry overall remains well capitalized, has strong notes. ... (The insurance industry) is open for business, is writing new policies, is in the claims, is the development of new products and, in fact, is looking for ways to develop and not trying to diminish, as banks. So there is no liquidity crisis in the insurance industry. There is no crisis of confidence in the insurance industry. Yes, we took a bruising in the investment markets, as everyone has. But insurers are not operating model which involves a high degree of leverage or debt, as he did for banks and investment banks.
Q: What are the prospects for the insurance industry in 2009? What is commercial insurance buyers should expect to renewals?
A: As we prepare for 2009, we see a situation where the capital in the industry have been reduced, both for insurers and reinsurers, and we begin to see the price of commercial insurance have started the business I do not want to grow rapidly; I just want to say they are not falling over or they are flat, perhaps small increases ... not ... (as) in 2000 or 2001, where price increases have been proceeding at a pace to double digits.
Q: So, in 2009, you expect a stronger market, but not as dramatic as in the years 2000 and 2001?
A: That's where the market is heading now. ... Insurers are seeking to have the same respect for the obligations in terms of insured losses, but do so in an environment where investment returns are much less generous than they were. So this means that the burden of proof is on the creation of the underwriting profits and the means to ensure that the price is more precisely tailored to the risks that we assume that possible. Because the contribution to the result of investment gains is obviously declined sharply in 2008 and we do not know if 2009 will be a better option. But what we know is that the magnitude of a disaster that could happen in 2009 is at least as important as it was in 2008.
Q: If customers are concerned about the financial security of their insurers?
A: I think it is always prudent insurance buyers use agents or brokers to provide information on the safety of the company or companies with which they are placing the company. ... But overall the insurers I'm talking about the insurance subsidiaries of companies, I do not speak of AIG Financial Products is that we have heard of the rules (is that) the business remain strong they remain healthy, they re open for business, and they are paying claims.
Q: What were the most important events of the commercial property / insurance industry accidents in 2008?
A: A return to more natural disaster losses with hurricanes that we had on the Gulf coast of Mexico this year. ... (And) I think it is significant (which) is not something happened: the democratically controlled Congress this year has not produced a significant tort reform, and there was that time that May it erode the tort reforms that were adopted in recent years. This could obviously be very expensive for buyers of commercial insurance to the line.
Art Credit: Robert Hartwig
30 December 2008
Copyright © 2009 LexisNexis, a division of Reed Elsevier Inc.. All rights reserved
Terms and Conditions Privacy Policy
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