Insurers Pain Closed in 2008, Hope 2009 brings change

(BestWire Services Via Acquire Media NewsEdge) Investment losses and continuing downward pressure on rates left many commercial insurers reeling during the fourth quarter of 2008.

Although some saw signs of at least a stabilization of rates in 2009, concerns about the overall economy left insurers feeling uncertain about this year.

Investment Losses Cut Deep Ramani Ayer, chairman and chief executive officer, Hartford Financial Services Group: 2008 was one of the toughest years in the Hartford?s history.

Jay Fishman, chairman and CEO, Travelers Cos. Inc.: On the investment side, market conditions were clearly much more challenging than anyone anticipated.

Gary Wayne Miller, chairman and CEO, Baldwin & Lyons Inc.: We have reported a net loss for the year caused by our losses on investments, and our book value declined for the same reason.

Thomas F. Motamed, chairman and CEO, property/casualty operations, CNA Financial Corp.: Prolonged and severe disruptions in the debt and equity markets ? resulted in significant losses in our investment portfolio, as well as declines in our net investment income during 2008.

Uncertainty about Rates and the Economy Michael McGuire, chief financial officer, Endurance Specialty Holdings Ltd: As a result of the continued uncertainty and distress in the capital markets, and an expectation of improving underwriting conditions, we have currently suspended our share repurchase program.

Motamed: While rate decreases moderated somewhat in the fourth quarter, it is still a very competitive market. Carriers are fighting to hold their renewals, and new-business pricing on the best accounts is still very aggressive.


William Berkley, president and CEO, W.R. Berkley Corp.: Why are we excited? Number one, the biggest player in the industry, AIG, is at best, in a difficult position, and at worst, we don't know where it's going to be.

Fishman: As it relates to pricing, I have noted in the last six months that the world feels like a riskier place. Recent data suggests that we may now be starting to see an improvement in the pricing environment.

Considering a Turnaround in 2009 Ayer: In the absence of healthy and functioning credit markets, we are concerned that the recession both in the U.S. and abroad may be deeper and longer than initially expected. In looking at the property and casualty market, we believe 2009 will remain competitive. We expect pricing declines in commercial lines to moderate in 2009.

Fishman: The last couple of times that we have faced changes in cycles, they have been in some relatively robust economic times. ? I think this is somewhat uncharted, and I just don?t know. I don?t have an experience to look back to and point to.

Berkley: A huge percentage of the industry capacity, we would say 25% of the industry capacity and probably 30%-plus of the specialty capacity, is in uncertain financial position. We believe that it will lead to the change in prices we anticipate, combined with the current state of affairs -- that there is no capital rushing into the business.

Miller: Pricing for our property reinsurance product has hardened some, especially on Jan. 1 renewals. We expect that trend to continue, mainly because the increases were most needed as pricing had slipped too far.

(By Alyn Ackermann, senior associate editor, BestWeek: Alyn.Ackermann@ambest.com) Copyright ? 2009 A.M. Best Company, Inc.