Premium Growth: A measure for a response to changing needs?

Virtually all industries respect and demand top line growth. Publicly traded companies, competing for capital, are required to demonstrate an ability to facilitate top line growth. In stark contrast to other industries, the property/casualty insurance industry prefers slow but steady growth. In fact, three of the National Association of Insurance Commissioners’ Insurance Regulatory Information System ratios utilize gross or net written premium to monitor premium growth.

Based upon the applicable ratio related to growth in net written premium, when the year-to-year growth in net written premium exceeds 33 percent, the result is considered exceptional (unusual). In this situation, how does the property/casualty insurance industry respond to changing conditions, increases in rates or the introduction of new coverages and protection in response to consumer and business demands? Fortunately, the companies with the most premium growth over the latest 12-month period available at the time of publication, Sept. 30, 2006, versus Sept. 30, 2005, are part of the solution.

The Top 25 P/C insurance companies in terms of premium growth wrote an additional $8.7 billion in direct written premium over the 12-month period ending Sept. 30, 2006, versus the period ending Sept. 30, 2005. The total direct written premium was nearly $65.9 billion versus $57.2 billion in the prior period. A list of the Top 25 is presented as part of this report.

A review of the reported financial position of the Top 25 indicated that each of the carriers with the most premium growth had the surplus to support the growth. Furthermore, the insurance companies in the Top 25 were ultimately owned by or part of well-known and highly-respected groups.

In an industry that scrutinizes the growth rate of premium writings, consumers and agents are well-served by having a core group of insurance companies capable of responding to the changing insurance and coverage needs of individuals as well as corporate consumers.

Joseph L. Petrelli is the president and founder of Demotech Inc., an Insurance Journal official Research Partner. Organized in 1985, Demotech Inc. is a Columbus, Ohio-based financial analysis and actuarial services company. Demotech Inc. provides services to regional insurance companies, title underwriters and specialty insurance markets. Financial Stability Ratings® of A or better are accepted by the secondary mortgage marketplace, virtually all mortgage lenders and an increasing number of umbrella insurance markets. Petrelli is a member in good standing of the Casualty Actuarial Society, American Academy of Actuaries and the Conference of Consulting Actuaries. Contact: www.demotech.com. Note: Neither the National Association of Insurance Commissioners, Kansas City, Missouri nor Highline Data endorse any analysis or conclusion based upon the use of its data.