Except for claims adjusters, 2005 was a disastrous year for the industry. Swiss Re’s sigma report logged almost 400 catastrophes, which caused damage totaling more than $230 billion: about one third, or $83 billion, was covered by insurance.
Miraculously most international companies (PXRE, Quanta, Alea excepted) survived, but the outlook going into 2006 was bleak, despite premium raises. But, like the dog that didn’t bark, hurricanes hardly happened, and the insurance and especially the reinsurance industry breathed a collective sigh of relief.
As an illustration of just how big the change was, consider Munich Re, the world’s biggest reinsurer — until Swiss Re bought GE Insurance Solutions. In 2005, the three fall hurricanes resulted in claims payments of around $2.8 billion at the time. For the first nine months of 2006 it posted a profit of $3.83 billion at today’s rates. Operating profits grew by 60.4 percent to $6.2 billion. What a difference a year makes.
The rest of the reinsurance industry posted proportionate gains. The combination of a very tight market in Florida and the U.S. Gulf Coast combined with draconian underwriting standards and big premium increases on treaty renewals offset softer markets elsewhere and gave the industry a respite.
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