Download ExcessCasualty-030910

Excess Casualty Insurance
Markets in the Post-Crisis World:
A Looming Tort Crisis?
March 9, 2010
Robert P. Hartwig, Ph.D., CPCU, President & Economist
Insurance Information Institute  110 William Street  New York, NY 10038
Tel: 212.346.5520  Cell: 917.453.1885  [email protected]  www.iii.org
Presentation Outline
I.
Insurance Industry Financial Overview & Outlook





Profitability
Premium Growth
Underwriting Performance
Financial Market (Investment) Overview
Financial Strength
II. Tort Environment/Casualty Risk Assessment
 Profitability
 Premium Growth
III. The Economic Storm: Financial Crisis, Recession & Recovery
 Exposure Overview & Outlook
IV. Public Policy Initiatives Affecting Casualty Insurance Markets
 Financial Service Regulation/Systemic Risk
 Terrorism Risk Insurance Program in Jeopardy
Q&A
2
I.
P/C (Re)Insurance Financial
Performance
Profitability, Premiums,
Investment Performance,
Capacity & Financial Strength
3
Profitability
A Profit Recovery is
Underway, But Is it Enough
and Can it Endure?
4
$65,777
$30,600
$44,155
$38,501
$30,029
$20,559
$20,598
$2,379
$10,870
$3,046
$10,000
$19,316
$20,000
$5,840
$30,000
$14,178
$40,000
$24,404
$50,000
$21,865
$60,000
2005 ROE*= 9.4%
2006 ROE = 12.2%
2007 ROE = 10.9%
2008 ROE = 0.3%
2009:Q3 ROAS1 = 4.5%
$30,773
$70,000





P-C Industry profits for fullyear 2009 were up sharply
from 2008, but are still well
below pre-crisis levels
$36,819
$80,000
$62,496
P/C Net Income After Taxes
1991–2009P ($ Millions)
$0
-$10,000
-$6,970
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08 09P
* ROE figures are GAAP; 1Return on avg. surplus. Excluding Mortgage & Financial Guaranty insurers yields a 4.5% ROAS for 2008
and 5.9% for the first 9 months of 2009. 2009:Q3 net income was $20.5 billion excluding M&FG.
Sources: A.M. Best, ISO, Insurance Information Institute
ROE: P/C vs. All
Industries1987–2009:Q3*
(Percent)
P/C Profitability is
Cyclical and Volatile
20%
Katrina,
Rita, Wilma
15%
10%
Sept. 11
Hugo
5%
4 Hurricanes
Lowest CAT
Losses in
15 Years
Andrew
0%
Financial
Crisis*
Northridge
-5%
87
88
89
90
91
92
93
94
95
96
97
98
US P/C Insurers
* Excludes Mortgage & Financial Guarantee in 2008 and 2009 through Q3.
Sources: ISO, Fortune; Insurance Information Institute.
99
00
01
02
03
04
05
06
07
08 09:Q3
All US Industries
6
ROE vs. Equity Cost of Capital:
US P/C Insurance:1991-2009:Q3*
(Percent)
The P/C Insurance Industry Fell Well
Short of Its Cost of Capital in 2008/09
18%
16%
14%
4%
2%
0%
-4.6 pts
-7.1 pts
6%
-9.0 pts
-13.2 pts
8%
-1.7 pts
10%
+2.3 pts
12%
The Cost of Capital is
the Rate of Return
Insurers Need to
Attract and Retain
Capital to the Business
US P/C Insurers Missed Their Cost of
Capital by an Average 6.7 Points from 1991
to 2002, but On Target or Better 2003-07,
but Fell Well Short in 2008/09
-2%
91
92
93
94
95
96
97
98
99
ROE
* Excludes mortgage and financial guarantee insurers
Source: The Geneva Association, Insurance Information Institute
00
01
02
03
04
05
06
07 08*09Q3*
Cost of Capital
7
A 100 Combined Ratio Isn’t What It
Once Was: 90-95 is Where It’s At Now
Combined ratio of about 100
generated a 6% ROE in 2009, 10%
in 2005 and16% in 1979
Combined Ratio / ROE
110
105
15.9%
14.3%
100.6
100
100.1
97.5
100.7
12.7%
15%
101.0
99.5
9.6%
95
18%
12%
9%
92.6
8.9%
5.9%
6%
90
4.5%
85
3%
0%
80
1978
1979
2003
2005
Combined Ratio
2006
2008*
2009:Q3
ROE*
Combined Ratios Must Be Lower in Today’s Depressed
Investment Environment to Generate Risk Appropriate ROEs
* 2009 figure is return on average statutory surplus. 2008 and 2009 figures exclude mortgage and financial guarantee insurers
Source: Insurance Information Institute from A.M. Best and ISO data
ei
ns
ur
an
ce
**
R
Pe
rs
on
Pv a l L
in
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as es
s
Pe
Au
rs
to
Pr
o
C
om p
m
er
C
om cial
m
lA
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ut
re
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om
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P
C
om rop
m
C
Fi
de as
lit
y/
Su
W
re
ar
ty
ra
nt
y
Su
rp
lu
s
Li
M
ne
ed
s
M
al
W
C
Reduction in Combined Ratio Necessary to Offset
1% Decline in Investment Yield to Maintain
Constant ROE, by Line*
0.0%
-1.0%
-2.0%
-3.0%
-4.0%
-1.8%-1.8% -2.0%
-1.9%-2.1%
-3.6%
-3.1% -3.3%-3.3%
-3.7%
-4.3%
-5.0%
-5.2%
-6.0%
-5.7%
-7.0%
-7.3%
-8.0%
Lower Investment Earnings Place a Greater Burden on
Underwriting and Pricing Discipline
*Based on 2008 Invested Assets and Earned Premiums
**US domestic reinsurance only.
Source: A.M. Best; Insurance Information Institute.
11
P/C Reserve Development, 1992–2011E
$20
23.2
6
Impact on
Combined Ratio
(Points)
$15
$10
13.7
11.7
2.3
4
9.9
7.3
2
1
0
$0
-2.1
-$5
-$10
-2.6
-4.1
-6.6
-8.3
-6.7
-9.5
-9.9 -9.8
-$15
-5
-6
11E
10E
07
06
05
04
03
02
01
00
99
98
97
96
95
94
93
92
09
-14.6-16 -15
-$20
-2
-4
08
Prior Yr. Reserve Release ($B)
$25
$5
8
Prior Yr. Reserve
Development ($B)
Impact on Combined Ratio (Points)
$30
Reserve Releases Will Expected to Taper Off
in 2010 and Drop Significantly in 2011
Note: 2005 reserve development excludes a $6 billion loss portfolio transfer between American Re and Munich Re. Including this
transaction, total prior year adverse development in 2005 was $7 billion. The data from 2000 and subsequent years excludes
development from financial guaranty and mortgage insurance.
Sources: Barclay’s Capital; A.M. Best.
12
Net Prior Year Reserve Development
by Line, 2008
Reserve release have contributed to
the bottom line for several years,
but pace will eventually slow
Sources A.M. Best, ISO, Barclay’s Capital Research.
13
110
105
100
95
106.4
107.4
105.8
108.3
101.6
105.3
105.6
109.2
107.8
109.2
110.1
110.0
115.9
112.3
107.3
100.8
100.1
96.6
98.3
96.0
100.9
100.6
92.4
93.9
95.5
97.4
105.1
105.5
101.9
105.7
105.9
109.4
115
106.9
107.8
108.4
111.8
120
115.7
114.7
Calendar Year vs. Accident Year
P/C Combined Ratio: 1992–2010E1
90
85
80
92
93
94
95
96
97
98
99
00
01
Calendar Year
02
03
04
05* 06
07
08 09E 10E
Accident Year
Accident Year Results Show a More Significant Deterioration in Underwriting
Performance. Calendar Year Results Are Helped by Reserve Releases
Note: 2005 reserve development excludes a $6 billion loss portfolio transfer between American Re and Munich Re. Including this
transaction, total prior year adverse development in 2005 was $7 billion. The data from 2000 and subsequent years excludes
development from financial guaranty and mortgage insurance.
Sources: Barclay’s Capital; A.M. Best.
14
Number of Years with Underwriting
Profits by Decade, 1920s–2000s
Number of Years with Underwriting Profits
12
10
10
8
8
7
6
6
5
4
4
3
2
0
0
1980s
1990s
0
1920s
1930s
1940s
1950s
1960s
1970s
2000s*
Underwriting Profits Were Common Before the 1980s
(40 of the 60 Years Before 1980 Had Combined Ratios Below 100) –
But Then They Vanished. Not a Single Underwriting Profit Was
Recorded in the 25 Years from 1979 Through 2003
* 2000 through 2009. 2009 combined ratio was 100.7 through Q3.
Note: Data for 1920–1934 based on stock companies only.
Sources: Insurance Information Institute research from A.M. Best Data.
16
Performance by Segment:
Commercial/Personal Lines &
Reinsurance
17
Calendar Year Combined Ratios
by Segment: 2008-2010P
110
108
106
104
102
100
98
96
94
92
90
107.2
Commercial lines and reinsurance
combined ratios are expected to
deteriorate in 2010 while personal lines is
expected to improve
103.7
103.6
101.0
101.2
100.3
100.5
99.8
92.2
Personal Lines
Commercial Lines
2008
2009E
US Reinsurance
2010P
Overall deterioration in 2010 underwriting performance is due to expected
return to normal catastrophe activity along with deteriorating underwriting
performance related to the prolonged commercial soft market
Sources: A.M. Best (historical and estimates/projected for 2009 and 2010); Insurance Information Institute.
18
Number of Top 10 Jury
Awards, 1995 - 2007
25
22 22
TX, NY and CA
lead the U.S. in
jumbo-size jury
awards
20
20
17
15
10
8
7
6
5
5
4
3
2
2
2
2
1
1
1
Source: LawyersWeekly USA,, January 22, 2008.
N
J
N
V
N
M
SC
O
R
D
M
LA
TN
IL
G
A
A
L
D
C
*
O
M
FL
C
A
N
Y
TX
0
*All against Iran for terrorist activity
After-Tax Return on Surplus (ROE)
by Segment: 2008-2010P
8%
7%
6%
5%
4%
3%
2%
1%
0%
-1%
-2%
7.3%
6.6%
7.1%
Personal lines ROEs should
improve in 2010 and remain
flat in commercial lines and
reinsurance
5.3%
5.2%
5.3%
3.9%
1.7%
Personal Lines
-1.3%
Commercial Lines
2008
2009E
Reinsurance
2010P
Profitability will rise or stabilize across most p/c lines, barring a
financial crisis relapse or major catastrophic losses
Sources: A.M. Best (historical and estimates/projected for 2009 and 2010); Insurance Information Institute.
21
Net Written Premium Growth
by Segment: 2008-2010P
6%
Personal lines will return to growth in 2010
while commercial lines and reinsurance are
expected to continue to shrink
3.5%
4%
1.8%
2%
0%
-2%
-0.7% -1.1%
-4%
-1.5% -2.0%
-4.0%
-6%
-5.6%
-8%
-7.9%
-10%
Personal Lines
Commercial Lines
2008
2009E
Reinsurance
2010P
Rate and exposure are more favorable in personal lines, whereas a
prolonged soft market and sluggish recovery from the recession
weigh on commercial lines. Low catastrophe losses and ample
capacity are holding down reinsurance prices while higher insurer
retentions impact premiums
Sources: A.M. Best (historical and estimates/projected for 2009 and 2010); Insurance Information Institute.
23
Change in Net Investment Income
by Segment: 2008-2010P*
Net investment income is expected to
begin to recover in all segments in 2010
15%
10.7%
10%
3.4%
5%
1.9%
1.9%
0%
-0.8%
-5%
-4.1%
-10%
-15%
-12.8%
-13.4%
-16.1%
-20%
Personal Lines
Commercial Lines
2008
2009E
Reinsurance
2010P
Investment income consists primarily of interest on bonds and stock
dividends. Both were hit hard during the financial crisis as the Fed slashed
interest rates to near zero and corporations cut dividends. A recovery in
investment asset values beginning in Q2 2009—which reduced realized capital
losses—has helped offset some of the decrease in investment income.
Sources: A.M. Best (historical and estimates/projected for 2009 and 2010); Insurance Information Institute.
24
Investment Yield by Segment:
2008-2010P*
Investment yields are shrinking
across all segments—down 10
to 100 bases points since 2008
5.0%
4.6%
4.5%
4.0%
3.8%
3.5%
3.5%
3.7%
3.9%
3.9%
3.6%
3.8%
3.3%
3.0%
2.5%
2.0%
Personal Lines
Commercial Lines
2008
2009E
Reinsurance
2010P
The Fed slashed interest rates in 2008 and has kept them low since, eroding
the yield on all types of bonds, especially US Treasury securities. Yields will
not recover until the Fed begins monetary policy tightening.
Sources: A.M. Best (historical and estimates/projected for 2009 and 2010); Insurance Information Institute.
25
96
97
98
99
00
01
02
03
04
05
07
99.5
97.6
08 09E* 10P*
Commercial Multi-Peril is Expected to Continue to
Perform Reasonably Well
*2009E and 2010P figures are for the combined liability and non-liability components.
Sources: A.M. Best; Insurance Information Institute.
97.0
108.0
06
95.1
89.8
105.4
83.8
93.8
101.9
104.9
97.7
97.3
89.0
95
CMP-Non-Liability
116.1
116.2
121.0
117.0
115.0
115.0
113.1
122.4
125.0
CMP-Liability
115.3
108.5
113.6
100.7
119.0
130
125
120
115
110
105
100
95
90
85
80
119.8
116.8
Commercial Multi-Peril Combined Ratio:
1995–2010P
P/C Premium Growth
Primarily Driven by the
Industry’s Underwriting Cycle,
Not the Economy
30
Strength of Recent Hard
Markets by NWP Growth
(Percent)
25%
1975-78
1984-87
2000-03
20%
15%
10%
5%
0%
-5%
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10F
-10%
Net Written Premiums Fell 0.7% in 2007 (First
Decline Since 1943) by 2.0% in 2008, and 4.2%
in 2009, the First 3-Year Decline Since 1930-33
During the Great Depression. Expected decline
of 1.6% in 2010.
Shaded areas denote “hard market” periods
Sources: A.M. Best (historical and forecast), ISO, Insurance Information Institute
33
Average Commercial Rate Change,
All Lines, (1Q:2004–4Q:2009)
Source: Council of Insurance Agents & Brokers; Insurance Information Institute
3Q09
4Q09
-6.0%
2Q09
-4.9%
-5.8%
1Q09
-5.1%
-6.4%
-11.0%
-12.9%
-13.5%
-12.0%
-13.3%
-16%
4Q08
3Q08
2Q08
1Q08
4Q07
3Q07
2Q07
-11.8%
-5.3%
-3.0%
-2.7%
1Q07
4Q06
3Q06
2Q06
1Q06
4Q05
3Q05
2Q05
1Q05
3Q04
2Q04
4Q04
-4.6%
KRW Effect
-11.3%
-14%
Magnitude of Price
Declines Shrank
During Crisis,
Reflecting Shrinking
Capital, Reduced
Investment Gains,
Deteriorating
Underwriting
Performance, Higher
Cat Losses and
Costlier Reinsurance
-9.6%
-12%
-8.2%
-10%
-9.7%
-8%
-9.4%
-6%
-7.0%
-4%
-5.9%
-2%
-3.2%
0%
-0.1%
1Q04
(Percent)
Market Remains
Soft as Capital
Restored and
Underwriting
Losses Fall
34
Change in Commercial Rate Renewals,
by Line: 2009:Q4
Su
re
ty
&O
D
EP
L
In
te
rru
pt
W
io
C
n
Bu
s.
ct
io
n
C
on
st
ru
ut
o
lA
m
om
C
br
el
la
U
m
m
om
C
L
G
Al
lC
om
lP
ro
p
m
er
ci
al
Percentage Change (%)
1.0%
0.2%
0.0%
-1.0%
-2.0%
-2.3%
-3.0%
-4.0%
-4.0%
-5.0%
-6.0%
-7.0%
-5.0%
-5.6%
-6.0%
-3.9%
-1.9%
-3.7%
-4.6%
-5.8%
Most Major Commercial Lines Renewed Down in Q4:2009 by
Roughly the Same Margin as a Year Earlier
Source: Council of Insurance Agents and Brokers; Insurance Information Institute.
35
Change in Commercial Rate Renewals,
by Account Size: 1999:Q4 to 2009:Q4
Percentage Change (%)
Peak = 2004:Q4
+28.5%
Market has Been
Soft for 6 years
and Remains Soft
as Capital is
Restored and
Underwriting
Losses Fall
KRW
Effect
Source: Council of Insurance Agents and Brokers; Insurance Information Institute.
Trough = 2004:Q4
-13.6%
36
Cumulative Qtrly. Commercial Rate Changes,
by Account Size: 1999:Q4 to 2009:Q4
1999:Q4 = 100
Pricing today is
where is was in
Q2:2001 (pre-9/11)
KRW
Effect
Source: Council of Insurance Agents and Brokers; Insurance Information Institute.
37
Investment Performance
Investments Drove Profit Decline in
2008 and Improvement in 2009
38
Property/Casualty Insurance Industry
Investment Gain: 1994–2009P1
($ Billions)
$70
$64.0
$58.0
$60
$52.3
$51.9
$47.2
$50
$59.4
$56.9
$45.3
$44.4
$42.8
$40 $35.4
$55.7
$48.9
$36.0
$31.4
$35.1
$30
$20
$10
$0
94
95
96
97
98
99
00
01
02
03
04
05*
06
07
08
09P
Investment Gains Fell by 51% In 2008 Due to Lower Yields,
Poor Equity Market Conditions. In 2009, the Return of Realized Capital
Losses Helped Offset Lower Investment Income
1
Investment gains consist primarily of interest, stock dividends and realized capital gains and losses.
* 2005 figure includes special one-time dividend of $3.2B.
Sources: ISO; Insurance Information Institute.
Treasury Yield Curves:
Pre-Crisis (July 2007) vs. Dec. 2009
6%
5%
4.82%
4.96%
5.04% 4.96%
4.82%
4.82%
4.88%
5.00% 4.93%
5.00%
4.40%
4%
Treasury yield curve is near its
most depressed level in at
least 45 years. Investment
income is falling as a result
3%
2%
5.19%
4.49%
3.59%
3.07%
2.34%
1.38%
0.87%
1%
0.03%
0.05%
0.17%
1M
3M
6M
December 2009 Yield Curve
Pre-Crisis (July 2007)
0.37%
0%
1Y
2Y
3Y
5Y
7Y
10Y
20Y
30Y
Stock Dividend Cuts Will Further Pressure Investment Income
Sources: Board of Governors of the United States Federal Reserve Bank; Insurance Information Institute.
41
Capital/Policyholder
Surplus (US)
Shrinkage, but Not Enough
to Trigger Hard Market
44
Policyholder Surplus,
2006:Q4–2009:Q4P
Capacity Peaked at
$521.8 as of 9/30/07
($ Billions)
$540
$512.8
$520
$500 $487.1
$521.8 $517.9
$515.6
Capacity as of 12/31/09
was just 0.5% below the
2007 peak and will likely
set a new record in 2010
$519.3
$505.0
$496.6
$490.8
$478.5
$480
$463.0
$455.6
$460
$437.1
$440
$420
$400
$380
06:Q4 07:Q1 07:Q2 07:Q3 07:Q4 08:Q1 08:Q2 08:Q3 08:Q4 09:Q1 09:Q2 09:Q3 09:Q4P
Declines Since 2007:Q3 Peak
Source: ISO, AM Best.
08:Q2: -$16.6B (-3.2%)
08:Q3: -$43.3B (-8.3%)
08:Q4: -$66.2B (-12.9%)
09:Q1: -$84.7B (-16.2%)
09:Q2: -$58.8B (-11.2%)
09:Q3: -$31.8B (-5.9%)
09:Q4: -$2.5B (-0.5%)
46
Global Reinsurance Capacity Shrank
in 2008, Mostly Due to Investments
Global Reinsurance Capacity
$370
Source of Decline
Realized
Capital
Losses
$360
$350
31%
$330
$310
55%
$300
Change in
Unrealized
Capital Losses
$290
14%
Hurricanes
$270
2007
2008
Global Reinsurance Capacity
Fell by an Estimated 17% in 2008
Source: AonBenfield Reinsurance Market Outlook 2009; Insurance Information Institute.
47
Ratio of Insured Loss to Surplus for
Largest Capital Events Since 1989*
(Percent)
The Financial Crisis at its
Peak Ranks as the Largest
“Capital Event” Over
the Past 20+ Years
18%
15%
16.2%
13.8%
12%
10.9%
9.6%
9%
6.9%
6.2%
6%
3.3%
3%
0%
6/30/1989
Hurricane
Hugo
6/30/1992
Hurricane
Andrew
12/31/93
Northridge
Earthquake
6/30/01 Sept.
11 Attacks
6/30/04
Florida
Hurricanes
6/30/05
Hurricane
Katrina
* Ratio is for end-of-quarter surplus immediately prior to event. Date shown is end of quarter prior to event
** Date of maximum capital erosion; As of 9/30/09 (latest available) ratio = 5.9%
Source: PCS; Insurance Information Institute
Financial
Crisis as of
3/31/09**
49
Historically, Hard Markets Follow
When Surplus “Growth” is Negative*
Surplus growth is now
positive but premiums
continue to fall, a departure
from the historical pattern
(Percent)
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09E10P
NWP % change
Surplus % change
Sharp Decline in Capacity is a Necessary but
Not Sufficient Condition for a True Hard Market
* 2009 NWP and Surplus figures are % changes as of Q4:09P vs Q4:08
Sources: A.M. Best, ISO, Insurance Information Institute
50
Financial Strength & Ratings
Industry Has Weathered
the Storms Well
51
P/C Insurer Impairments, 1969–2009p
5 of the 11 are Florida
companies (1 of these
5 is a title insurer)
0
5
7
11
18
14
15
35
18
19
31
29
16
12
16
14
13
9
13
12
9
11
9
7
8
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09p
10
15
12
20
19
30
31
34
34
40
36
41
50
49
50
47
49
50
48
55
60
60
58
70
The Number of Impairments Varies Significantly Over the P/C Insurance
Cycle, With Peaks Occurring Well into Hard Markets
Source: A.M. Best; Insurance Information Institute.
P/C Insurer Impairment Frequency vs.
Combined Ratio, 1969-2009p
120
Combined Ratio after Div
P/C Impairment Frequency
2.0
1.8
1.6
1.4
110
1.2
105
1.0
0.8
100
90
0.4
2009 estimated impairment rate rose to 0.36% up from a near
record low of 0.23% in 2008 and the 0.17% record low in 2007;
Rate is still less than one-half the 0.79% average since 1969
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09*
95
0.6
Impairment Rate
Combined Ratio
115
0.2
0.0
Impairment Rates Are Highly Correlated With Underwriting Performance
and Reached Record Lows in 2007/08
*Combined ratio of 101.7 is through Q3:09; 0.36% 2009 impairment rate is III estimate based on preliminary A.M. Best data.
Source: A.M. Best; Insurance Information Institute
53
Summary of A.M. Best’s P/C Insurer
Ratings Actions in 2009
Despite financial market
turmoil and a soft market
in 2009, 76% of ratings
actions by A.M. Best
were affirmations;
just 2.9% were
downgrades and 3.2%
were upgrades
Other – 216
11.9%
75.7%
Affirm – 1,375
Under Review – 69 3.8%
2.4%
Initial – 44
3.2%
Upgraded – 59 2.9%
Downgraded –
53
P/C Insurance is by Design a Resilient Business.
The Dual Threat of Financial Disasters and Catastrophic Losses
Are Anticipated in the Industry’s Risk Management Strategy
.
Source: A.M. Best.
54
Reasons for US P/C Insurer
Impairments, 1969–2008
Deficient Loss Reserves and Inadequate Pricing Are the Leading Cause
of Insurer Impairments, Underscoring the Importance of Discipline.
Investment Catastrophe Losses Play a Much Smaller Role
Reinsurance Failure
Sig. Change in Business
3.7%
4.2%
Misc.
9.1%
Investment
Problems
7.0%
Affiliate Impairment
38.1%
Deficient Loss Reserves/
In-adequate Pricing
7.9%
7.6%
Catastrophe Losses
8.1%
Alleged Fraud
14.3%
Rapid Growth
Source: A.M. Best: 1969-2008 Impairment Review, Special Report, Apr. 6, 2008
56
II.
Tort Environment Overview
Is the Pendulum Swinging Against
Casualty Risks and their Insurers?
57
Over the Last Three Decades, Total Tort Costs*
as a % of GDP Appear Somewhat Cyclical
($ Billions)
$300
Tort Sytem Costs
2.50%
Tort Costs as % of GDP
$250
Tort System Costs
$200
$150
2.00%
$100
1.75%
2009–2010 Growth in Tort
Costs as % of GDP is Due in
Part to Shrinking GDP
$50
$0
Tort Costs as % of GDP
2.25%
1.50%
80
82
84
86
88
90
92
94
96
98
00
02
04
06
08 10E
* Excludes the tobacco settlement, medical malpractice
Sources: Tillinghast-Towers Perrin, 2009 Update on US Tort Cost Trends, Appendix 1A; I.I.I. calculations/estimates
for 2009 and 2010 and 2011
58
Cost of US Tort System ($ Billions)
$263
09E
$273
$255
08
$247
$261
$260
$233
$252
$180
$169
07
$100
$167
$156
$156
$159
$148
$144
$130
$150
$129
$200
$141
$250
$205
$300
$246
$350
$289.5
Tort costs consumed 1.79% of GDP in 2008, down from 2.24% in 2003
Per capita “tort tax” was $? in
2009, up from $838 in 2008
and $636 in 2000
$50
Source: Tillinghast-Towers Perrin, 2009 Update on US Tort Cost Trends.
11E
10E
06
05
04
03
02
01
00
99
98
97
96
95
94
93
92
91
90
$0
The Nation’s Judicial Hellholes
(2008/2009)
Watch List
 Rio Grande Valley &
Gulf Coast, TX
 Madison County, IL
 Baltimore, MD
 St Louis (the city of),
St Louis and Jackson
Counties, MO
Nevada
Illinois
Clark County
(Las Vegas)
Cook County
West Virginia
New Jersey
Atlantic County
(Atlantic City)
Dishonorable
Mention
 MA Supreme
Judicial Court
 MO Supreme Court
California
Alabama
Los Angeles
County
Macon and
Montgomery
Counties
Source: American Tort Reform Association; Insurance Information Institute
South Florida
60
The Nation’s Judicial Hellholes: 2010
Illinois
Watch List
Cook County






West Virginia
New York City
California
Alabama
Madison County, IL
Jefferson County, MS
Texas Gulf Coast
Rio Grande Valley, TX
Dishonorable
Mention





AR Supreme Court
MN Supreme Court
ND Supreme Court
PA Governor
MA Supreme
Judicial Court
 Sacramento County
New Jersey
Atlantic County
(Atlantic City)
New Mexico
Appellate
Courts
Source: American Tort Reform Association; Insurance Information Institute
South Florida
61
Average Jury Awards 1998 - 2007
$1,400
2004
2005
2000
2001
$827
$600
$756
$700
2002
2003
$602
$800
$747
$725
$900
$834
$1,000
$986
$1,100
$1,052
$1,200
$1,062
$1,300
$1,224
The average jury award
more than doubled from
1998 to 2007
$500
1998
1999
Source: Jury Verdict Research; Insurance Information Institute.
2006
2007
Average Jury Awards 1998 vs. 2002 and 2007
$10,000
1998
$9,000
2002
2007
$1,375
$590
$564
$472
$219
$170
$1,000
$834
$2,000
$602
$4,844
$4,426
$4,043
$2,854
$3,000
$1,224
$4,000
$2,338
$5,000
$2,731
$4,164
$6,000
$3,717
$7,000
$5,487
$8,000
$0
Overall
Vehicular
Liability
*Award trends in wrongful deaths of adult males.
Source: Jury Verdict Research; Insurance Information Institute.
Premises
Liability
Wrongful
Death*
Medical
Malpractice
Products
Liability
Sum of Top 10 Jury Awards 2004-2008
Millions
$6,000
Total of Top 10 awards has
more than doubled in the
last three years.
$5,158.8
$5,000
$4,000
$2,953.7
$3,000
$2,000
$1,000
$815.0
$615.5
2006
2007
$1,344.0
$1,511.2
2008
2009
$0
2004
2005
Source: Insurance Information Institute from Lawyers USA, January 2005, 2006, 2007, 2008, 2009 and 2010.
2009 Top Ten Verdicts
Value
Issue
State
$370 Million
Defamation
California
$330 Million
Personal Injury (Drunk driving case)
Florida
$300 Million
Personal Injury (Tobacco verdict)
Florida
$89 Million
Personal Injury (Drunk driving case)
Missouri
$78.75 Million
Personal Injury (Prempro)
New Jersey
$77.4 Million
Medical Malpractice
New York
$71 Million
Conversion and Breach of Fiduciary Duty
Texas
$70 Million
Workers Comp Case
Texas
$65 Million
Personal Injury
Florida
$60 Million
Medical Malpractice
New York
Source: Lawyers USA, January 15, 2010.
Trends in Million Dollar Verdicts*
100%
50%
40%
10%
60%
65%
59%
53%
57%
11%
15%
13%
17%
14%
11%
5%
6%
4%
20%
13%
15%
17%
30%
41%
60%
29%
30%
33%
70%
51%
The frequency of multimillion dollar awards is
increasing across virtually
all types of defendants.
Across all liability types,
million dollar-plus awards
rose from 13% of all awards
from 2001-2003 to 17% in
2006-2007.
80%
2006-2007
48%
2004-2005
37%
2001-2003
90%
0%
All Liabilities
Vehicular
Liability
Personal
Negligence
Premises
Liability
*Verdicts of $1 million or more.
Source: Jury Verdict Research; Insurance Information Institute.
Business
Negligence
Government
Negligence
Medical
Malpractice
Products
Liability
Insurer Defense & Cost Containment Expenses
as a % of Incurred Losses, 2005-2008*
150%
2007
2008
10.0%
9.9%
11.6%
10.7%
bi
li
6.6%
6.6%
6.1%
5.9%
11.1%
11.0%
12.0%
11.6%
om
p
28.3%
27.1%
24.5%
24.4%
42.2%
36.7%
41.2%
34.3%
50%
48.0%
56.6%
55.1%
58.1%
70.0%
100%
78.6%
65.4%
134.5%
2006
15.9%
15.2%
14.5%
13.6%
Percent of Incurred Losses
2005
C
lit
y
ab
i
Li
PP
A
om
W
or
ke
m
.A
ut
o
rs
Li
a
C
ty
**
Li
ab
er
al
G
en
om
C
ic
a
M
ed
ili
ty
*
m
.M
-P
**
e
ct
ic
pr
a
lM
al
Li
a
ts
Pr
od
uc
A
ll
L
ia
b
ili
ty
Li
n
bi
lit
y
es
0%
*Net of reinsurance, excl. state funds. **Liability portion only. ***Excludes products liability.
Source: National Association of Insurance Commissioners (NAIC) Annual Statement Database, via Highline Data, LLC; Insurance
Information Institute.
Shareholder Class Action Lawsuits*
600
498
500
After surging in 2007 and
2008, litigation activity related
to the financial crisis began to
ebb after financial markets
began to recover in the 2nd
quarter of 2009
400
300
202
200 164
163
241
231
188
173
209216
266
227238
182
111
223
178
176
119
100
19
0
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10*
*Securities fraud suits filed in U.S. federal courts as of March 1, 2010.
Source: Stanford University School of Law (securities.stanford.edu); Insurance Information Institute
Business Leaders Ranking of Liability
Systems*

Best States
1.
Delaware
2.
Nebraska
3.
Maine
4.
Indiana
5.
Utah
6.
Virginia
7.
Iowa
8.
Vermont
9.
Colorado
10.
Kansas
New in 2008





Colorado
Indiana
Kansas
Virginia
Vermont
Drop-offs




Minnesota
New Hampshire
Tennessee
Wisconsin
Midwest/West has mix of
good and bad states.

Worst States
41.
Texas
Newly Notorious
42.
Florida
 Florida
 South Carolina
43.
South Carolina
44.
California
45.
Hawaii
46.
Illinois
47.
Alabama
48.
Mississippi
49.
Louisiana
50.
West Virginia
Source: US Chamber of Commerce 2008 State Liability Systems Ranking Study; Insurance Info. Institute.
Rising Above
 Arkansas
 Alaska
Average Total Limits Purchased
by All U.S. Firms* ($ Millions)
$110
$105.0
$101.8
$99.1
$95.7
$100
$88.7
$85.8
$85.9
$83.2
$90
Limits fell by 45%
between 2000 and 2008.
Price/capacity are issues.
$87
$80 $77.9
$77
$75
$70
$66 $66
$58
$60
*Includes underlying primary limits
Source: Limits of Liability 2008, Marsh, Inc.
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
19
96
19
95
19
19
94
$50
Excess Liability Market Capacity
North America ($ Billions)
$2.015
$1.660
$1.645
$1.570
$1.535
$1.575
$1.425
$2.045
$1.710
$1.405
$2.0
$1.334
$1.432
$2.5
$1.941
$1.721
$3.0
$2.011
In 2008, capacity is back to 2000 levels.
$1.5
$1.0
$0.5
Source: Marsh, 2008 Limits of Liability Report
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
19
96
19
95
19
19
94
$0.0
How the Risk Dollar is Spent (2008)
Total liability costs account for about 30% of the risk dollar
Firms w/Revenues > $1 Billion
Firms w/Revenues < $1 Billion
Property
Premiums,
15%
Other Costs,
21%
Property
Premiums,
12%
Other Costs,
15%
Retained
Property
Losses, 1%
Retained
Property
Losses, 5%
Admin Costs,
7%
Admin Costs,
9%
Liability
Premiums, Prof. Liability
13%
Liability
Premiums,
11%
Costs, 4%
Prof. Liability
Costs, 9%
Retained WC
Losses, 10%
WC
Premiums,
7%
Liability
Retained
Losses, 9%
Total Mgmt.
Liab., 5%
Retained WC
Losses, 22%
Source: 2009 RIMS Benchmark Survey; Insurance Information Institute
WC
Premiums, 6%
Retained
Liability
Losses, 12%
Total Mgmt.
Liab., 6%
Discrimination Charges Filed with EEOC
by Type: Percent Change FY06-FY09
Change in Charges Filed (%)
Retaliation and age
discrimination suits are up
substantially
60%
49.0%
50%
40%
30%
37.6%
33.7%
23.1%
23.3%
37.7%
33.3%
20.6%
20%
9.4%
10%
ay
Eq
ua
lP
is
ab
ilit
y
D
Ag
e
et
al
ia
tio
n
R
el
ig
io
n
R
rig
in
N
at
io
na
lO
Se
x
ac
e
R
Al
l
0%
The Financial Crisis and Poor Labor Market Conditions Have Contributed
to a Surge Employment Discrimination Charges
Source: Equal Opportunity Employment Commission; Insurance Information Institute.
74
Rising Medical/Health
Care Costs
Medical Costs Will Rise Steeply in
the Years Ahead, Pressuring
Many Casualty Lines
75
Consumer Price Index for Medical for
All Items vs. Medical Care, 1960-2009*
(1982-1984 = 100)
400
350
Medical Care inflation has been surging
ahead of general inflation (CPI) for 25
years. Since 1982-84, the cost of
medical care has more than tripled.
300
250
200
150
100
0
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
50
All Items
Medical Care
Medical costs Will Continue to Rise Relatively Rapidly Irrspective of
Outcome of US Healthcare Reform Debate
* Through June 30, 2009
Sources: Bureau of Labor Statistics, Insurance Information Institute
76
National Health Expenditures and Expenditures as
a Share of GDP, 1960-2018E
($ Billions)
$5,000
25%
National Health Expenditures
National Health Expenditures as % of GDP
$4,500
20%
$3,500
$3,000
15%
$2,500
$2,000
10%
$1,500
Healthcare expenditures as a share
of GDP consumed an estimated
16.6% of GDP in 2008 and are
expected to rise to 20.3% by 2018
$1,000
$500
$0
Tort Costs as % of GDP
Tort System Costs
$4,000
5%
0%
60
80
93
98
00
02
04
06
08E 10E 12E 14E 16E 18E
Sources: Centers for Medicare and Medicaid, Office of the Actuary; Insurance Information Institute.
77
Average Annual Growth in US Per Capita
Health Care Costs, 1960-2018F
25%
20.9%
20%
The 1970s were the most
inflationary decade for
medical costs, rising at nearly
21% per year
15.6%
15%
14.1%
10%
7.0%
Over the decade,
health expenditures
will likely increase well
ahead of the general
pace of inflation
7.9%
6.2%
5%
0%
1960-1970
1970-1980
1980-1990
1990-2000
2000-2007
Source: Insurance Information Institute calculations based on data from the Centers for Medicare &
Medicaid Services, Office of the Actuary.
2007-2018
III.
The Economic Storm
What the Financial Crisis, Recession
and Recovery Mean for the
Industry’s Exposure Base
79
3.2%
3.3%
3.2%
3.0%
3.0%
2.8%
2.8%
2.8%
2.2%
11:4Q
11:3Q
11:2Q
11:1Q
10:4Q
10:3Q
10:2Q
10:1Q
Economic growth up sharply
in Q4:09 with rebuilding of
inventories and stimulus.
More moderate growth
expected in 2010/11
09:3Q
09:2Q
09:1Q-6.4%
08:4Q -5.4%
08:3Q
08:2Q
-2.7%
-0.7%
08:1Q
07:4Q
07:3Q
07:2Q
07:1Q
2006
2005
2004
2000
-8%
2003
-6%
2002
-4%
Recession began in Dec.
2007. Economic toll of credit
crunch, housing slump,
labor market contraction has
been severe but modest
recovery is underway
2001
-2%
-0.2%
0%
-0.7%
1.5%
4.8%
2.9%
3.1%
3.6%
2.5%
0.1%
2%
1.6%
4%
0.8%
6%
3.7%
8%
4.8%
The Q1:2009 decline was
the steepest since the
Q1:1982 drop of 6.4%
09:4Q
Real GDP Growth (%)
5.7%
Real GDP Growth*
Personal and Commercial Lines Exposure Base Have Been Hit Hard
and Will Be Slow to Come Back
*
Estimates/Forecasts from Blue Chip Economic Indicators.
Source: US Department of Commerce, Blue Economic Indicators 2/10; Insurance Information Institute.
80
Real GDP Growth vs. Real P/C
Premium Growth: Modest Association
18.6%
20.3%
Real GDP Growth vs. Real P/C (%)
4%
7.7%
2%
1.2%
1.6%
5.6%
6%
0%
-2.9%
-0.5%
-3.8%
-4.4%
-3.8%
-3.8%
-1.6%
-1.0%
-1.8%
-1.0%
8%
-2%
-4%
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10E
-10%
-7.4%
-6.5%
-1.5%
-5%
-0.9%
0%
-0.4%
-0.3%
3.1%
1.1%
0.8%
0.4%
0.6%
0.3%
5%
5.8%
1.8%
4.3%
5.2%
15%
10%
Real GDP
Real GDP Growth
Real NWP Growth
20%
Real NWP Growth
13.7%
25%
P/C Insurance Industry’s Growth is Influenced Modestly
by Growth in the Overall Economy
Sources: A.M. Best, US Bureau of Economic Analysis, Blue Chip Economic Indicators, 2/10; Insurance Information Institute
82
Regional Differences Will
Significantly Impact P/C Markets
Recovery in Some Areas Will
Begin Years Ahead of Others
and Speed of Recovery Will Differ
by Orders of Magnitude
83
State Economic Growth Varied
Tremendously in 2008
Percent Change in Real GDP by State, 2007–2008
Rocky Mountain
2.2
WA
2.0
MT
1.8
OR
1.6
WY
4.4
NV
-0.6
UT
1.4
CA
0.4
Plains
2.0
ND
7.3
ID
0.0
Mountain, Plains States
Growing the Fastest
Great Lakes
-0.4
MN
2.0
IA
2.1
CO
2.9
KS
2.2
MI
-1.5
IL
0.3
IN
-0.6
NY
1.6
OH
-0.7
AZ
-0.6
OK
2.7
NM
2.0
TX
2.0
WV
2.5
AR
0.7
LA
0.3
MS
1.7
AL
0.7
VA
1.3
NC
0.1
TN
0.5
SC
0.6
GA
-0.6
Southwest
1.7
RI
CT -0.9
-0.4
NJ
0.6
DE
-1.6
Mideast
1.3
DC
3.0
US = 0.7
Highest Quintile
Fourth Quintile
FL
-1.6
HI
0.7
MA
1.9
Third Quintile
AK
-2.0
US Bureau of Economic Analysis
PA
1.1
MD
1.3
MO
1.3
KY
-0.1
Far West
0.6
ME
1.4
VT
NH
1.7
1.8
WI
0.7
SD
3.5
NE
1.3
New England
1.0
Southeast
0.0
Second Quintile
Lowest Quintile
84
Fastest Growing States in 2008:
Plains, Mountain States Lead
Real State GDP Growth (%)
8%
7.3%
7%
6%
5%
4.4%
4%
3.5%
2.9%
3%
2.7%
2.5%
2.1%
2.0%
IA
TX, MN,
NM, WA
2%
1%
0%
ND
WY
SD
CO
OK
WV
Natural Resource and Agricultural States Have Done Better Than Most
Others Recently, Helping Insurance Exposure in Those Areas
Source: US Bureau of Economic Analysis; Insurance Information Institute.
85
Slowest Growing States in 2008:
Diversity of States Suffering
Real State GDP Growth (%)
KY
CT
AZ
GA
IN
NV
RI
MI
DE
FL
OH
AK
0.0%
-0.1%
-0.5%
-0.4%
-0.6% -0.6% -0.6% -0.6%
-1.0%
-0.9%
-1.5%
-1.5%
-1.6% -1.6%
-1.7%
-2.0%
-2.0%
-2.5%
States in the North, South, East and West All Represented Among
Hardest Hit, But for Differing Reasons
Source: US Bureau of Economic Analysis; Insurance Information Institute.
86
Labor Market Trends
Fast & Furious:
Massive Job Losses Sap the
Economy and Commercial/Personal
Lines Exposure
87
Unemployment and Underemployment
Rates: Rocketing Up in 2008-09
January 2000 through February 2010, Seasonally Adjusted (%)
18
Traditional Unemployment Rate U-3
U-6 went from
8.0% in March
2007 to 17.5% in
Oct 2009; Stood
at 16.8% in Feb.
2010
Unemployment + Underemployment Rate U-6
16
Recession
ended in
November
2001
14
12
Unemployment
kept rising for
19 more
months
Recession
began in
December
2007
10.1% Oct 2009
unemployment
rate (U-3) was
the highest
monthly rate
since 1983.
10
8
6
4
Feb
10
2
Jan
00
Jan
01
Jan
02
Jan
03
Jan
04
Jan
05
Jan
06
Source: US Bureau of Labor Statistics; Insurance Information Institute.
Jan
07
Jan
08
Jan
09
Peak rate in the
last 30 years:
10.8% in Nov Dec 1982
Stood at 9.7% in
Feb. 2010.
Jan
10
89
9.0
9.0
9.1
9.1
9.4
9.5
9.6
9.9
10.6
10.3
10.7
10.1
10
10.9
10.9
11.0
11.0
11.1
11.2
11.8
12.4
12.1
12
12.6
Unemployment Rate (%)
14
The unemployment rate has been rising
across the country (up in 43 out of 50
states in Dec.), but some states are
doing much better than others.
12.9
16
14.6
13.0
Unemployment Rates by State, December 2009:
Highest 25 States*
8
6
4
2
0
MI NV RI SC CA DC FL NC IL OR AL OH TN KY MS GA NJ IN MO WA MA ID AZ WV NY
*Provisional figures for December 2009, seasonally adjusted.
Sources: US Bureau of Labor Statistics; Insurance Information Institute.
92
4.4
4.7
4.7
6.6
6.6
6.6
6.7
6.7
6.9
6.9
6.9
7.0
7.4
8.3
8.3
8.7
8.3
8.8
8.9
6
7.5
7.5
8
The unemployment rate has been rising
across the country (up in 43 out of 50
states in Dec.), but some states are
doing much better than others.
7.7
7.5
7.5
Unemployment Rate (%)
10
9.0
8.9
Unemployment Rates By State, December 2009:
Lowest 25 States*
4
2
0
DE PA CT AK WI TX ME NM AR CO LA MD WY MN NH HI VA VT MT UT OK IA KS SD NE ND
*Provisional figures for December 2009, seasonally adjusted.
Sources: US Bureau of Labor Statistics; Insurance Information Institute.
93
US Unemployment Rate
6.9%
8.9%
9.1%
9.9%
10:Q3
9.3%
10.0%
10:Q2
9.5%
10.2%
10:Q1
9.7%
10.0%
4.9%
08:Q1
4.6%
07:Q3
4.8%
4.5%
07:Q2
07:Q4
4.5%
5.0%
07:Q1
6.0%
5.4%
7.0%
6.1%
8.0%
8.1%
Unemployment is
expected to peak above
10% in early 2010.
9.0%
09:Q4
10.0%
9.3%
Rising unemployment
is eroding payrolls
and workers comp’s
exposure base.
11.0%
9.6%
2007:Q1 to 2011:Q4F*
*
= actual;
= forecasts
Sources: US Bureau of Labor Statistics; Blue Chip Economic Indicators (2/10); Insurance Information Institute
11:Q4
11:Q3
11:Q2
11:Q1
10:Q4
09:Q3
09:Q2
09:Q1
08:Q4
08:Q3
08:Q2
4.0%
94
Monthly Change Employment*
-36
-26
-109
-224
-225
-212
-346
-515
Feb 10
Jan 10
Dec 09
Nov 09
Oct 09
Sep 09
Aug 09
February’s loss of
36,000 jobs was a better
than expected; Labor
market recoveries are
often erratic.
Jul 09
Jun 09
-387
May 09
-753
Mar 09
Apr 09
-726
Feb 09
-779
Jan 09
-681
Dec 08
-597
Nov 08
Oct 08
Sep 08
Aug 08
Jul 08
Jun 08
May 08
Apr 08
Mar 08
Feb 08
-528
-380
-321
-175
-128
-161
-137
-160
-122
-144
-72
Monthly Losses in Dec–May
Were the Largest in the
Post-WW II Period but
Pace of Loss is Diminishing
Jan 08
200
100
0
-100
-200
-300
-400
-500
-600
-700
-800
-900
64
January 2008 through February 2010 (Thousands)
Job Losses Since the Recession Began in Dec. 2007 Total 8.4 Million;
14.9 Million People are Now Defined as Unemployed
Source: US Bureau of Labor Statistics: http://www.bls.gov/ces/home.htm; Insurance Information Institute
95
Seasonally adjusted.
Source: US Bureau of Labor Statistics
137.8
137.8
137.7
137.6
137.6
137.4
Mar 08
Apr 08
May 08
June 08
Jul 08
Aug 08
130.6
130.3
130.1
129.9
129.6
129.7
129.6
129.6
129.5
Jul 09
Aug 09
Sep 09
Oct 09
Nov 09
Dec 09
Jan 10
Feb 10
131.2
May 09
Jun 09
131.5
132.1
136.2
135.1
133.5
132.8
Apr 09
Mar 09
Feb 09
Jan 09
Dec 08
Nov 08
136.7
137.9
Feb 08
Oct 08
138.0
Jan 08
137.0
138.1
Dec 07
Sep 08
138.0
139
138
137
136
135
134
133
132
131
130
129
Nov 07
US Nonfarm Private Employment
Monthly, Nov 2007 – Feb 2010 (Millions)
Employment Peak;
Recession Starts
The US Economy
Lost About 8.4
Million Jobs in
Just Over 2 Years
97
US Unemployment Rate Forecasts
Quarterly, 2010:Q1 to 2011:Q4
11.0%
10.5%
10.0%
10.3%
10.3%
10.3%
10.3%
10.2%
10.0%
9.5%
10.0%
9.9%
9.6%
9.4%
10 Most Pessimistic
Consensus/Midpoint
10 Most Optimistic
9.0%
8.5%
9.7%
10.1%
9.5%
9.2%
8.9%
10.0%
9.3%
9.9%
9.1%
8.7%
8.9%
8.4%
8.0%
Unemployment will remain high even
under the most optimistic of scenarios
7.5%
9.7%
7.9%
7.0%
10:Q1
10:Q2
10:Q3
10:Q4
11:Q1
11:Q2
11:Q3
11:Q4
Stubbornly High Unemployment Will Hurt the
Workers Comp’s Exposure Base
Sources: Blue Chip Economic Indicators (2/10); Insurance Information Institute
98
Unemployment and Educational Attainment:
More Education = Less Unemployment
Unemployment Rate (%), January 2009 vs. January 2010
Jan. 2009 Unemployment Rate
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
Jan. 2010 Unemployment Rate
17.6%
14.4%
11.5%
10.0%
9.3%
7.5%
7.3%
5.7%
4.1%
Less than HS
Diploma
HS Graduate
Some College,
No Degree
Associate Degree
5.1%
Bachelor's
Degree or Higher
A Higher (Record) Proportion of WC Exposure Base is Associated
With Employment of Women
Source: US Bureau of Labor Statistics accessed at ftp://ftp.bls.gov/pub/suppl/empsit.cpseea17.txt .
99
Wage & Salary Disbursements (Payroll Base)
vs. Workers Comp Net Written Premiums
Wage & Salary Disbursement (Private Employment) vs. WC NWP ($ Billions)
7/90-3/91
12/07-?
3/01-11/01
$7,000
$45
$6,000
$40
$35
$5,000
$30
$4,000
$25
$3,000
$20
$2,000
$1,000
Wage & Salary
Disbursements
$15
WC NPW
$5
$0
$10
$0
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09*
Weakening Payrolls Have Eroded $2B+ in Workers Comp Premiums
* Average Wage and Salary data as of 10/1/2009. Shaded areas indicate recessions
Source: US Bureau of Economic Analysis; Federal Reserve Bank of St. Louis at
http://research.stlouisfed.org/fred2/series/WASCUR ; I.I.I. Fact Books
101
Estimated Effect of Recessions* on
Payroll (Workers Comp Exposure)
(Percent
Change)
10%
8%
6%
(All Post WWII Recessions)
Recessions in the 1970s and 1980s
saw smaller exposure impacts
because of continued wage
inflation, a factor not present
during the 2007-2009 recession
The Dec. 2007 to mid2009 recession
caused the largest
impact on WC
exposure in 60 years
8.5%
4.6%
3.7%
4%
3.5%
2.1%
2%
1.1%
0%
-0.5%
-1.1%
-2%
-2.0%
-4%
-6%
-3.6%
-4.4%
19481949
19531954
19571958
19601961
19691970
19731975
1980
19811982
19901991
2001
20072009
Recession Dates (Beginning/Ending Years)
*Data represent maximum recorded decline over 12-month period using annualized quarterly wage and salary accrual data
Source: Insurance Information Institute research; Federal Reserve Bank of St. Louis (wage and salary data); National Bureau of
Economic Research (recession dates).
Frequency: 1926–2008
A Long-Term Drift Downward
Manufacturing – Total Recordable Cases
Rate of Injury and Illness Cases per 100 Full-Time Workers
30
25
20
15
10
5
0
'26 '29 '32 '35 '39 '42 '45 '48 '52 '55 '58 '61 '65 '68 '71 '74 '78 '81 '84 '87 '91 '94 '97 '00 '04 '07
Note: Recessions indicated by gray bars.
Sources: NCCI from US Bureau of Labor Statistics; National Bureau of Economic Research
103
When Might All of the Lost Jobs
Be Regained? 2016?
Source: Wall Street Journal, October 9, 2009, p. A3
106
Insurance Industry
Employment Trends
Soft Market, Difficult Economy,
Consolidation and Outsourcing
Have All Contributed to Industry’s
Job Losses
107
U.S. Employment in the Direct
P/C Insurance Industry: 1990–2010*
Thousands
520
500
480
As of Jan. 2010, P/C insurance
industry employment was down
by 24,200 or 4.9% to 466,900
since the recession began in Dec.
2007 (compared to overall US
employment decline of 6.1%)
460
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
*As of January 2010; Not seasonally adjusted; Does not including agents & brokers
Note: Recessions indicated by gray shaded columns.
Sources: US Bureau of Labor Statistics; National Bureau of Economic Research (recession dates); Insurance Information Institutes.
108
U.S. Employment in the
Reinsurance Industry: 1990–2010*
Thousands
48
44
40
As of Jan. 2010, US employment
in the reinsurance industry was
down by 1,600 or 5.9% to 25,300
since the recession began in Dec.
2007 (compared to overall US
employment decline of 6.1%)
36
32
28
24
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
*As of January 2010; Not seasonally adjusted; Does not including agents & brokers
Note: Recessions indicated by gray shaded columns.
Sources: US Bureau of Labor Statistics; National Bureau of Economic Research (recession dates); Insurance Information Institutes.
109
U.S. Employment in Insurance
Agencies & Brokerages: 1990–2010*
Thousands
700
650
600
550
As of Jan. 2010, employment at
insurance agencies and
brokerages was down by 44,200
or 6.5% to 635,400 since the
recession began in Dec. 2007
(compared to overall US
employment decline of 6.1%)
500
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
*As of January 2010; Not seasonally adjusted. Includes all types of insurance.
Note: Recessions indicated by gray shaded columns.
Sources: US Bureau of Labor Statistics; National Bureau of Economic Research (recession dates); Insurance Information Institutes.
110
U.S. Employment in Insurance
Claims Adjusting: 1990–2010*
Thousands
60
55
50
45
As of Jan. 2010, claims adjusting
employment was down by 7,200
or 13.8% to 44,800 since the
recession began in Dec. 2007
(compared to overall US
employment decline of 6.1%)
40
'90 '90 '91 '92 '93 '94 '95 '95 '96 '97 '98 '99 '00 '00 '01 '02 '03 '04 '05 '05 '06 '07 '08 '08 '10
*As of January 2010; Not seasonally adjusted.
Note: Recessions indicated by gray shaded columns.
Sources: US Bureau of Labor Statistics; National Bureau of Economic Research (recession dates); Insurance Information Institutes.
111
Crisis-Driven Exposure
Drivers
Economic Obstacles
to Growth in P/C Insurance
112
0.96
1.36
0.56
0.9
0.7
0.71
2.07
1.80
1.71
1.60
1.57
1.64
1.47
1.48
1.35
1.29
New home starts
plunged 34% from
2005-2007; drop
through 2009 is
72% (est.); A net
annual decline of
1.49 million units,
lowest since
records began
in 1959
0.90
1.1
1.20
1.3
1.01
1.5
1.19
1.7
1.46
1.9
1.62
2.1
1.85
(Millions of Units)
1.96
New Private Housing Starts, 1990-2011F
0.5
0.3
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10F11F
Weak Construction Risk Exposure Forecast for 2010-2011.
Source: U.S. Department of Commerce; Blue Chip Economic Indicators (2/10); Insurance Information Institute.
113
Business Bankruptcy Filings,
1980-2009*
90,000
80,000
50,000
40,000
30,000
20,000
10,000
0
1980-82
1980-87
1990-91
2000-01
2006-09
58.6%
88.7%
10.3%
13.0%
204.2%*
There were 45,510 business bankruptcies during the first
three quarters of 2009, up 52% from 2008:Q3 and on
track for about 60,000 for all of 2009, the most since
1993. Current recession will generate 200%+ surge
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
60,000
43,694
48,125
70,000
69,300
62,436
64,004
71,277
81,235
82,446
63,853
63,235
64,853
71,549
70,643
62,304
52,374
51,959
53,549
54,027
44,367
37,884
35,472
40,099
38,540
35,037
34,317
39,201
19,695
28,322
43,546
60,000
% Change Surrounding
Recessions
Significant Implications for all Commercial Lines
*2009 is annualized estimate based on actual business bankruptcies in first three quarters of 2009
Source: American Bankruptcy Institute,
http://www.abiworld.org/AM/Template.cfm?Section=Business_Bankruptcy_Filings1&Template=/TaggedPage/Tagge
dPageDisplay.cfm&TPLID=59&ContentID=36301.
115
Private Sector Business Starts,
1993:Q2 – 2009:Q2*
(Thousands)
192
188
187
189
186
190
194
191
199
204
202
195
196
196
206
206
201
192
198
206
206
203
211
205
212
200
205
204
204
197
203
209
201
203
192
192
193
201
204
202
210
212
209
216
220
223
220
220
210
221
212
204
218
209
207
199
191
193
230
220
210
177
180
186
174
177,000 businesses started
in 2009:Q2, the lowest level
since 1993
170
171
180
175
190
186
200
160
150
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
Business Starts Are Down Nearly 20% in the Current Downturn,
Holding Back Most Types of Commercial Insurance Exposure
*Latest available as of March 2010, seasonally adjusted
Source: Bureau of Labor Statistics, http://www.bls.gov/news.release/cewbd.t07.htm.
117
Amount of Outstanding Loans by
FDIC-Insured Institutions, 2009 vs. 2008
$Billions
$2,500
$2,000
Down
$273.2B
(-18.3%)
2008
2009
Down
$139.4B
(-13.1%)
$1,500
Down
$128.5B
(-6.3%)
$2,045.2
$1,916.7
$1,494.0
$1,220.8
$1,000
$590.9
$500
$451.5
$0
Construction and
Development Secured by
Real Estate
Commercial and Industrial
1-4 Family Residential
Mortgages
FDIC-Insured Institutions Had $541.1B (-13.1%) Less in Outstanding
Loans in These Three Categories at Year-end 2009 vs. 2008
Source: FDIC Quarterly Banking Profile, Fourth Quarter 2009, Table I-A
118
Capacity Utilization,
monthly, Mar 2001-Jan 2010
“Full Capacity”
Index
82%
Hurricane
Katrina
80%
78%
76%
Recession began
December 2007
74%
72%
Source: Federal Reserve Board statistical releases
119
Jan 10
Oct 09
Jun 09
Mar 09
Dec 08
Sep 08
Jun 08
Mar 08
Dec 07
Sep 07
Jun 07
Mar 07
Dec 06
Sep 06
Jun 06
Mar 06
Dec 05
Sep 05
Jun 05
Mar 05
Dec 04
Sep 04
Jun 04
Mar 04
Dec 03
Sep 03
Jun 03
Mar 03
Dec 02
Sep 02
Jun 02
Mar 02
Dec 01
Sep 01
66%
Jun 01
68%
The closer the economy is
to operating at “full
capacity,” the greater the
inflationary pressure
March 2001November 2001
recession
Mar 01
70%
Total Industrial Production,
monthly, Mar 2001-Jan 2010 (Index 2002=100)*
There is a lot of unused capacity in the
economy. This might hold inflation down.
Index
113
March 2001November 2001
recession
110
Hurricane
Katrina
107
104
101
Source: http://www.federalreserve.gov/releases/g17/ipdisk/ip_sa.txt.
*seasonally adjusted
120
10-Jan
Oct 09
Jun 09
Mar 09
Dec 08
Sep 08
Jun 08
Mar 08
Dec 07
Sep 07
Jun 07
Mar 07
Dec 06
Sep 06
Jun 06
Mar 06
Dec 05
Sep 05
Jun 05
Mar 05
Sep 04
Jun 04
Mar 04
Dec 03
Sep 03
Jun 03
Mar 03
Dec 02
Sep 02
Jun 02
Mar 02
Dec 01
Sep 01
Jun 01
Mar 01
95
Dec 04
Recession began
December 2007
98
Total Industrial Production
2007:Q1 to 2011:Q4F (%)
6.9% 7.0%
3.2% 3.6%
5.0%
1.5%
5.3% 4.7% 4.5% 4.5%
4.2% 4.1% 4.2% 3.8%
0.3% 0.2%
0.0%
-4.6%
-9.0%
-10.4%
-13.0%
11:Q4
11:Q3
11:Q2
11:Q1
10:Q4
10:Q3
09:Q4
09:Q3
09:Q2
09:Q1
08:Q4
-19.0%
08:Q3
08:Q2
08:Q1
07:Q4
07:Q3
07:Q1
-20.0%
07:Q2
-15.0%
Industrial Production
Began to Contract Sharply
in Late 2008 and Plunged
in 2009:Q1
10:Q2
-10.0%
Industrial Production is Aided
by a Rebuild of Inventories,
Gradual Economic Recovery
and Stimulus Program
(Q2:09 through 2010)
10:Q1
-5.0%
End of Recession in mid-2009, Stimulus Program Are Benefiting
Industrial Production and Therefore Insurance Exposure Both
Directly and Indirectly, Albeit Very Modestly
Sources: US Bureau of Labor Statistics; Blue Chip Economic Indicators (2/10); Insurance Information Institute
121
Year-Over-Year Change in Quarterly US
State Tax Revenues, Inflation Adjusted
3Q08
1Q08
3Q07
1Q07
3Q06
1Q06
3Q05
1Q05
3Q04
1Q04
3Q03
1Q03
3Q02
1Q02
3Q01
1Q01
3Q00
1Q00
3Q99
1Q99
-25%
3Q09
-20%
-13.3%
-17.6%
-10.9%
-15%
1Q09
-10%
Nationwide, state-tax collections for
fiscal year 2009 declined by a record
$63 billion, or 8.2 percent from the
previous year. That loss is roughly twice
the amount states gained in fiscal relief
from the federal stimulus package
-5.8%
-1.3%
-1.7%
-3.0%
-7.6%
-10.7%
0%
-5%
0.1%
4.0%
4.7%
5.7%
8.2%
3.4%
6.0%
7.0%
12.4%
6.6%
4.2%
3.7%
6.3%
2.6%
1.3%
1.9%
2.3%
0.4%
0.8%
0.4%
3.0%
0.2%
5%
-0.6%
10%
0.0%
1.6%
15%
2.4%
2.4%
4.7%
5.6%
9.9%
9.5%
4.4%
1.8%
0.4%
20%
States Revenues Were Down 10.9% in Q3 2009, the Second Consecutive
Quarter of Record Revenue Decline. This Will Impact Public Infrastructure
Spending Significantly.
Source: US Census Bureau; Nelson A. Rockefeller Institute of Government:
http://www.rockinst.org/pdf/government_finance/state_revenue_report/2010-01-07-SRR_78.pdf
123
Green Shoots
The Recession May
Have Ended, but Is it
Self-Sustaining?
128
Hopeful Signs That the Economic
Recovery is Underway
 Recession appears to have ended, freefall of 2008/09 is over
 GDP shrinkage has ended; Economy is expanding
 Pace of job losses is slowing, despite setbacks
 Major stock market indices well off record lows, anticipating recovery
 Some signs of retail sales stabilization are evident
 Financial sector is stabilizing
 Banks are reporting quarterly profits
 Many banks expanding lending to very credit worthy people
and businesses
 Housing sector seems to be bottoming out
 Home are much more affordable (attracting buyers)
 Mortgage rates are still low relative to pre-crisis levels (attracting buyers)
 Freefall in housing starts and existing home sales is ending in
many areas
 Inflation and energy prices are under control
 Consumer and business debt loads are shrinking
Source: Insurance Information Institute.
129
10 Industries for the Next 10 Years:
Insurance Solutions Needed
Government
Health Care
Energy (Traditional)
Alternative Energy
Agriculture
Natural Resources
Environmental
Technology
Light Manufacturing
Export-Oriented Industries
130
Inflation Trends:
Concerns Over Stimulus Spending
and Monetary Policy
Mounting Pressure on Claim
Cost Severities?
131
Annual Inflation Rates
(CPI-U, %), 1990–2011F
Inflation peaked at 5.6% in August 2008
on high energy and commodity crisis.
The recession and the collapse of the
commodity bubble have reduced
inflationary pressures
Annual Inflation Rates (%)
6.0
5.0
4.9 5.1
3.8
4.0
3.0 3.2
3.0
2.0
3.3 3.4
3.0
2.9 2.8
2.6
2.4
2.5 2.3
3.8
2.8
2.2 2.0
1.9
1.5
1.3
1.0
0.0
-0.4
-1.0
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10F11F
There is So Much Slack in the US Economy That Inflation Should Not Be a
Concern Through 2010/11, but Depreciation of Dollar is Concern Longer Run
Sources: US Bureau of Labor Statistics; Blue Chip Economic Indicators, Feb. 10, 2010 (forecasts).
132
Forecasts of Annual Inflation Rates
(CPI-U, %), 2010–2015F
Even the pessimistic forecasts
don’t see the CPI rising much
above 3% in the next five years
Annual Inflation Rates (%)
4.0
3.0
2.8
2.1
2.0
3.0
2.9
2.0
3.0
2.1
1.6
1.1
1.2
3.1
3.0
2.2
1.4
Blue Chip Avg
Pessimistic
2.3
1.6
2.4
1.7
Blue Chip Avg
Median
Blue Chip Avg
Optimistic
1.0
0.0
2010
2011
2012
2013
2014
2015
Inflation Will Accelerate Modestly through 2015 but Should Is Not
Expected to Become a Major Concern or Threat
Sources: Blue Chip Economic Indicators, Oct 2009 and Feb 2010.
133
P/C Insurers Experience Inflation More
Intensely than 2009 CPI Suggests
(Percent)
8%
5.5%
6%
3.8%
4%
2.7%
3.0%
3.1%
Legal
Services
US Tort
Costs
Medical
Care
4.3%
2%
0%
-0.4%
-2%
Overall CPI
Motor
Vehicle
Body
Work
Bodily
Injury
Severity
WC Med
Severity
Healthcare and Legal/Tort Costs Are a Major P/C Insurance Cost Driver. These Are
Expected to Increase Above the Overall Inflation Rate (CPI) Indefinitely
Source: CPI is Blue Chip Economic Indicator 2009 estimate, 12/09; Legal services, medical care and motor vehicle body work are avg.
monthly year-over-year change from BLS. Tort costs is 2009 Towers-Perrin estimate. WC figure is I.I.I. estimate based on historical NCCI
data.
134
Top Concerns/Risks for Insurers
if Inflation Is Reignited
Concerns
The Federal Reserve Has Flooded Financial System with Cash (Turned on the
Printing Presses), the Federal Gov’t Has Approved a $787B Stimulus and the
Deficit is Expected to Mushroom to $1.8 Trillion. All Are Potentially Inflationary.
 What are the potential impacts for insurers?
 What can/should insurers do to protect themselves from the risks of inflation?
Key Risks
From Sustained/Accelerating Inflation
 Rising Claim Severities
 Cost of claims settlement rises across the board (property and liability)
 Rate Inadequacy
 Rates inadequate due to low trend assumptions arising from use of historical data
 Reserve Inadequacy
 Reserves may develop adversely and become inadequate (deficient)
 Burn Through on Retentions
 Retentions, deductibles burned through more quickly
 Reinsurance Penetration/Exhaustion
 Higher costs  risks burn through their retentions more quickly, tapping into reinsurance
more quickly and potentially exhausting their reinsurance more quickly
Source: Insurance Information Institute.
135
Tort Cost Growth & Medical Cost Inflation
vs. Overall Inflation (CPI-U), 1961-2009E*
14%
Tort costs move with inflation
but at twice the rate of inflation
12%
Tort system is an inflation
amplifier
Avg. Ann. Change: 1961-2009E*
Tort costs: +8.4%
Med costs: +5.9%
Overall inflation: +4.2%
10%
8%
6%
4%
Are there healthcare
reform spillover effects?
2%
Tort Costs
Medical Costs
1971-80
1981-90
CPI
0%
1961-70
1991-2000
2001-09E
* CPI-U and medical costs as of Sept 2009; Tort figure is for full-year 2009 from Tillinghast.
Source: U.S. Bureau of Labor Statistics; Tillinghast-Towers Perrin, 2008 Update on U.S. Tort Costs; I.I.I.
IV.
Public Policy Issues
Government Action (Direct &
Indirect) Will Shape the Casualty
Insurance Enviroment for Many
Years to Come
137
Financial Services Regulation
Any Change to the Status Quo
Will Be Felt for Decades
138
Important Issues & Threats
Facing Insurers: 2010–2???
Regulatory Overreach
 Principle danger is that P/C insurers get swept into vast federal regulatory
overhaul and subjected to inappropriate, duplicative and costly regulation
(Dual Regulation)
 Systemic Risk Regulator (Too Big To Fail/Too Interconnected to Fail)
 Is any insurer systemically important?
 Federal Insurance Office Creation Within Treasury?
 Eventual “mission creep”?; Activist director?
 Consumer Financial Protection Agency
 Will it be limited to banks/creditors
 Federal Trade Commission: All Lines Study Authority?
 McCarran-Ferguson Rollback
 Will it be limited to Health/Med Mal lines?
 OFC/State Regulation Debate Lingers
 Taxation/Offshore Domiciles
Bottom Line: Regulatory Outcome is Uncertain and Risk of Adverse
Outcome Exists. Ultimate Regulation Structure Will Be in Place for Decades
Source: Insurance Information Institute.
139
Terrorism: Insurance Concerns Resurface
Reasons Why Concerns Are Mounting in 2010
 Perception (Reality) that U.S. vulnerability is rising
 Thwarted Christmas Day attack by “underwear bomber”
 And new bin Laden tape claiming al Qaeda is responsible








Foiled NYC Subway Bomber Plot (Zazi case)
Trials of Guantanamo 9/11 suspects in Manhattan Court (?)
U.K. in January Raised Terror Alert Status to 2nd Highest Level
Increased anti-terror efforts, including full-body scans
Effort by government to appear more vigilant, prepared
Rise of groups such al Qaeda in the Arabian Peninsula
U.S. military surge in Afghanistan operations
Most buyers, producers have not thought about coverage
issues recently
 Obama Administration’s Intent to Reduce Support for TRIA
145
Obama Administration Proposal to Scale
Back Terrorism Risk Insurance Program
Administration’s Budget Proposal for FY 2011:
 Includes proposal to scale back federal support for terrorism risk
insurance program
 Proposal projects savings of $249 million from 2011-2020
 Administration’s justification is that this would “encourage the private
sector to better mitigate terrorism risk through other means, such as
developing alternative reinsurance options and building safer
buildings.”
Key Concerns
Among Industry Observers Over Proposed Reduction in Federal Support
 Suggestion of changes to law would have detrimental effect on
availability and affordability of terrorism insurance
 A 2009 Aon study estimated some 70-80 percent of the commercial
property insurance market would revert to absolute exclusions for
terrorism, if TRIA is changed.
Source: Budget of the U.S. Government Fiscal Year 2011
146
Terrorism Risk Insurance Program Faces Reduced
Support Under 2011 Proposed Federal Budget
$ Millions
By shifting more costs to insurers and
insureds in the event of a major terrorist
attack, the Administration believes that it can
save $378 million from 2011 through 2015
$400
$321
$320
$300
$200
$206
$193
$147
$100
$0
($100)
($26)
($42)
($102)
($200)
2011
2012
Baseline Net Costs
2013
($74)
($134)
2014
2015
Proposed Change from Current Law
The availability of terrorism coverage is threatened by the proposal in the FY
2011 federal budget. Coverage will likely be less available and more expensive.
Sources: U.S. federal budget for FY 2011 as proposed in February 2010; Insurance Information Institute.
147
Catastrophic Loss –
How Big of a CAT Would it Take
to Turn the Market Hard?
153
$100 Billion CAT Year is
Coming Eventually
$10.6
$27.5
$12.9
$5.9
$26.5
$4.6
$8.3
$10.1
$2.6
$7.4
$8.3
$16.9
$4.7
$2.7
$20
$7.5
$40
$5.5
$22.9
$60
2009 CAT
Losses
Were Down
48% though
Q3 from
$21.1B 2008
$26.0
$80
$61.9
2000s: A Decade of Disaster
2000s: $193B (up 117%)
1990s: $89B
$100
$6.7
$120
$9.2
($ Billions)
$100.0
US Insured Catastrophe Losses
$0
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09*20??
2009 CAT Losses Were Less than Half of 2008.
2005 Was by Far the Worst Year Ever for Insured Catastrophe
Losses in the Decade of the 2000s Were More than Double the 1990s,
But the Worst Has Yet to Come
* 2009 figure is Munich Re estimate.
Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01. Includes only business and personal
property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B.
Sources: Property Claims Service/ISO; Insurance Information Institute.
154
Insurance Information Institute Online:
www.iii.org
Thank you for your time
and your attention!
Twitter: twitter.com/bob_hartwig