Tort trends will likely remain stable in the year ahead, according to a survey conducted by the Insurance Information Institute (I.I.I.) at its 12th annual Property/Casualty Insurance Joint Industry Forum.
Sixty-six percent of the executives polled believed tort trends in 2008 would be little changed from 2007. However, 28 percent believed tort trends would deteriorate. Just 6 percent of those polled indicated that tort trends would improve. Nonetheless, respondents were very confident about wind versus water litigation. Eighty-percent of respondents indicated that wind versus water litigation was largely resolved in favor of the insurance industry.
Regarding whether Congress will adopt a National Catastrophe Insurance Plan in 2008, 90 percent of respondents did not think it was going to occur. In addition, 70 percent of insurance leaders thought the push for an Optional Federal Charter would not gain momentum on Capitol Hill in the year ahead.
Looking at the industry’s financial performance, a majority of industry leaders believed the market would continue to soften in most property/casualty lines. Broken down by line of insurance, only 24 percent of respondents believed profitability would improve in personal auto and homeowners insurance, 22 percent expected improvement in workers compensation. Overall, just 20 percent of respondents expected an improvement in commercial lines profitability in 2008.
Looking at consolidation, 80 percent of respondents thought there would be an increase both among insurers and reinsurers in 2008. “Soft market conditions and the accumulation of excess capital have historically been catalysts for increased merger and acquisition activity in the property/casualty insurance industry,” said Dr. Robert Hartwig, president of the Insurance Information Institute. Hartwig added that the last peak in merger and acquisition activity occurred in 1998 when the industry’s ratio of premiums written to policyholder surplus fell to $0.84:$1, just two cents lower than the $0.86:$1 ratio record during the third quarter of 2007.
On the investment side, 54 percent of industry leaders expected the equity markets to have a down year.
The majority of insurance leaders—56 percent—expected interest rates to fall in 2008, while 28 percent believe rates will remain flat.
On the political front, 72 percent of CEOs thought that the Democratic Party would win the White House in 2008.
For the poll questions and full results, go to the 2008 Joint Industry Forum Web page