The year 2011 is now behind us — and what a year it was for the P/C insurance industry.
There were many headlines. But it will be remembered mostly for record-high catastrophe losses. In May, we saw a tornado that ripped through Joplin, Mo., killing 158 people and leaving a 14-mile path of destruction. And that was only one of the record-breaking tornado events in 2011.
It was also an exceptional year for wildfires, with major blazes affecting Arizona and Texas, and destroying many homes and businesses. The May fire in Arizona burned more than 469,000 acres. The wildfires in Texas consumed tens of thousands of acres of drought-stricken areas.
And then there were Hurricane Irene and Tropical Storm Lee, which wreaked havoc and flooded many areas in the Northeast. Many towns in this region are still reeling from the damages. Some people still have not been able to move back into their houses.
It was also a year when the commercial lines rates started edging up. We saw numerous reports and declarations from CEOs, research firms and analysts in the past year. Reports point to slight rate hikes in certain classes and geographies. While most of those rate increases were applied to programs with catastrophe exposure, accounts with little or no such exposure or losses were often able to secure rate decreases during the second half of the year.
Many insurers had horrible financial results in 2011. Private U.S. P/C insurers’ net losses on underwriting grew to $34.9 billion in the first nine months of 2011, from $6.3 billion in 2010. The combined ratio deteriorated to 109.9 percent from 101.2 percent, according to the report last month from ISO. Net income fell to $8 billion from $27.1 billion. Publicly traded P/C insurers saw their composite profits fall as much as 70 percent.
Another major news in 2011 was also related to catastrophes: the Risk Management Solutions’ CAT model revision. Their latest model, incorporated into RMS Version 11.0, raised wind-related loss estimates for many non-coastal areas. It also raised many discussions in the industry.
And we also saw important developments from our nation’s capital, including: the ongoing implementation of the Nonadmitted and Reinsurance Reform Act, which was designed to modernize the surplus-lines regulation; the opening of the new Federal Insurance Office as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act; and the latest extension of the National Flood Insurance Program. (By the way, you can read back on all these news stories on www.InsuranceJournal.com)
So what does the New Year have in store for us? Insurance Journal asked industry veterans to look into their crystal ball and share their forecast and insight for 2012. Their comments appear on page 13. If their forecasts are any guide, 2012 will be another interesting, news-packed year.
Happy New Year everyone, and may you and your business see many great successes in 2012.