I would not say that we are experiencing increases in rates just yet, but have heard from many carriers that we should be expecting it early in ’09. I have heard that from both National Stock companies and Regional Mutuals.
I am starting to sell renewals at flat for good accounts and have had a few marginal accounts that garnered a small increase.
But, I still get slammed from a few rouge companies on new business.
With a combined ratio of 105.6 and investment income of only 1.1% for the 3 quarters (and sure to get worst after the 4th quarter is factored in), rates have to go up. The article does not mention the affect of the decreasing stock market on the stock value of insurance companies. This has to decrease the policy holder surplus and therefore decrease their ratio and writing capabilities. Plus reinsurance costs are supposed to go up in January. Rates have to start firming up for the carriers to make up all this bad stuff, not counting the lost premiums due to decreased rating basis such as sales and payroll, and clients going out of business.
If it does not turn then there will be some companies going out of business.
I agree the perfect storm has hit but it is to early to tell when we will see any market turn. I am not seeing any right now and if you are being shopped the insured will find a player willing to cash flow underwrite. So it is not happing in my world yet but some markets are trying to test the water.
Good news is most companies have bottomed out on their rate filings so it can not go down much more .
Nice one, Rob. I was thinking it but would not have written it!
3Q or 4Q of 2009 before the market turns…we are hearing reinsurance increases for captives and self insurance funds are hitting now, and maybe even the mutuals will start the turn. Reinsurance increases for the companies will start after 1/1, but maybe later.
There are still many companies out there who are in a position for growth, mainly those companies whose combined are below 95. We represent a few of them, and they are hitting the accelerator. It is affecting new business to our agency more than our renewals, but we are also in growth mode.
Its been fun – it should get more profitable very soon. We may wish for the soft market in 18 months.
Fannie, Freddie and now Madoff (Made off with the loot) :(
The next ugly regulatory surprise will be the insurance industry. The only difference being insurance companies are regulated on the State, not Federal level therefore insurance company insovlencies will be regional, not national news.
Am I missing something? The article quotes David Sampson, PCI president and chief executive officer as saying:
“That insurers remained profitable through nine-months 2008 despite multiple challenges is both a testament to their risk management and a sign that the property/casualty insurance industry remains well able to fulfill its obligations to policyholders,”
Did this guy not hear about the AIG bailout? If the government didn’t volunteer billions of our tax dollars to bail out the largest insurance company in the galaxy, how well able would the insurance industry be to fulfill these obligations? And doesn’t the need for a bailout call to question the level of the risk management?
TE is correct on the investment income. Combined Ratios are on premiums, so while the accounting statement shows a net loss now, the industry will earn that investment income over several years before all the losses are paid out.
Furthermore, an insurance company earns investment income on surplus and reserves, which together are usually 4-5 times the size of the annual written premium.
As for AIG, the individual insurance companies that make up AIG are all sound. It was the parent company that had issues. Fortunately, state regulators limit the transfer of funds from the insurance entities to the parent, or there would have been more problems.
OK lets say that Carrier X’s combined ratio is 105% including investment income.
What is their targeted ratio, and how do they get there in a horrible investment market? Buying fixed income at 3%? Invest in stocks and end up losing money (which I suppose is deductible)? Even with time value of money equations, at some point the carrier has to make a net profit so that surpluses remain intact.
As a CEO of a large Regional Brokerage the only guy I’ve read who “gets it” is the gay at Hales who wrote November’s Hales Report. He nailed it. Marshberry and Regean declared the hard marke was upon us and the hales guy takes the exact opposite view. He’s right. No one is talking about the Brokers. I agree…many will sell before they go upsides down in 2009. Ironshore/Bermuda is recapitalizing and “A” rated small regional insurers are offering CG2010 11/85 on California contractors! Rate has bottomed but exposures falling will force a never before seen underwriting suicide.
I was just a regional meeting for the Indiana / Safeco merger – or whatever they are calling it – and one of the LIBERTY MUTUAL REPRESENTATIVES told us that ‘we have not seen anything yet’ !!! They plan to continue to be aggressive and to buy business on the street. All of their regional markets are looking to be even more aggressive than the past few years.
Westfield is an Ohio regional A-rated admited offering CG2010 11/85 and just approved to continue the madness. Ironshore of Bermuda just stole Kelley from Lexington and they’ve also filed to offer the same for contractors.
When the dust settles, what few carriers are left will be owned in some fashion by us taxpayers
Could it be? A hardening market? Increased commission income?? WHOOPEEE!!
Is anyone seeing an increase in rates and if so, from what carriers for what lines?
I would not say that we are experiencing increases in rates just yet, but have heard from many carriers that we should be expecting it early in ’09. I have heard that from both National Stock companies and Regional Mutuals.
I am starting to sell renewals at flat for good accounts and have had a few marginal accounts that garnered a small increase.
But, I still get slammed from a few rouge companies on new business.
With a combined ratio of 105.6 and investment income of only 1.1% for the 3 quarters (and sure to get worst after the 4th quarter is factored in), rates have to go up. The article does not mention the affect of the decreasing stock market on the stock value of insurance companies. This has to decrease the policy holder surplus and therefore decrease their ratio and writing capabilities. Plus reinsurance costs are supposed to go up in January. Rates have to start firming up for the carriers to make up all this bad stuff, not counting the lost premiums due to decreased rating basis such as sales and payroll, and clients going out of business.
If it does not turn then there will be some companies going out of business.
I agree the perfect storm has hit but it is to early to tell when we will see any market turn. I am not seeing any right now and if you are being shopped the insured will find a player willing to cash flow underwrite. So it is not happing in my world yet but some markets are trying to test the water.
Good news is most companies have bottomed out on their rate filings so it can not go down much more .
Nice one, Rob. I was thinking it but would not have written it!
3Q or 4Q of 2009 before the market turns…we are hearing reinsurance increases for captives and self insurance funds are hitting now, and maybe even the mutuals will start the turn. Reinsurance increases for the companies will start after 1/1, but maybe later.
There are still many companies out there who are in a position for growth, mainly those companies whose combined are below 95. We represent a few of them, and they are hitting the accelerator. It is affecting new business to our agency more than our renewals, but we are also in growth mode.
Its been fun – it should get more profitable very soon. We may wish for the soft market in 18 months.
Fannie, Freddie and now Madoff (Made off with the loot) :(
The next ugly regulatory surprise will be the insurance industry. The only difference being insurance companies are regulated on the State, not Federal level therefore insurance company insovlencies will be regional, not national news.
Am I missing something? The article quotes David Sampson, PCI president and chief executive officer as saying:
“That insurers remained profitable through nine-months 2008 despite multiple challenges is both a testament to their risk management and a sign that the property/casualty insurance industry remains well able to fulfill its obligations to policyholders,”
Did this guy not hear about the AIG bailout? If the government didn’t volunteer billions of our tax dollars to bail out the largest insurance company in the galaxy, how well able would the insurance industry be to fulfill these obligations? And doesn’t the need for a bailout call to question the level of the risk management?
Further, if the combined ratio is 105.6 and investment income is 1.1%, how does that translate into profitable?
Regarding:
Further, if the combined ratio is 105.6 and investment income is 1.1%, how does that translate into profitable?
Well, I think its possible for long tailed lines since the insurer can earn investment income for many years before losses are paid out.
TE is correct on the investment income. Combined Ratios are on premiums, so while the accounting statement shows a net loss now, the industry will earn that investment income over several years before all the losses are paid out.
Furthermore, an insurance company earns investment income on surplus and reserves, which together are usually 4-5 times the size of the annual written premium.
As for AIG, the individual insurance companies that make up AIG are all sound. It was the parent company that had issues. Fortunately, state regulators limit the transfer of funds from the insurance entities to the parent, or there would have been more problems.
OK lets say that Carrier X’s combined ratio is 105% including investment income.
What is their targeted ratio, and how do they get there in a horrible investment market? Buying fixed income at 3%? Invest in stocks and end up losing money (which I suppose is deductible)? Even with time value of money equations, at some point the carrier has to make a net profit so that surpluses remain intact.
Not only that, but what about the effect of their own deteriorating stock value on the market and its effect on surplus?
As a CEO of a large Regional Brokerage the only guy I’ve read who “gets it” is the gay at Hales who wrote November’s Hales Report. He nailed it. Marshberry and Regean declared the hard marke was upon us and the hales guy takes the exact opposite view. He’s right. No one is talking about the Brokers. I agree…many will sell before they go upsides down in 2009. Ironshore/Bermuda is recapitalizing and “A” rated small regional insurers are offering CG2010 11/85 on California contractors! Rate has bottomed but exposures falling will force a never before seen underwriting suicide.
I was just a regional meeting for the Indiana / Safeco merger – or whatever they are calling it – and one of the LIBERTY MUTUAL REPRESENTATIVES told us that ‘we have not seen anything yet’ !!! They plan to continue to be aggressive and to buy business on the street. All of their regional markets are looking to be even more aggressive than the past few years.
Regionals are doing dumb things on Contractors in California??? What happened, did WEST BEND MOO-TUAL start writing contractors in California??
Roger that.
Westfield is an Ohio regional A-rated admited offering CG2010 11/85 and just approved to continue the madness. Ironshore of Bermuda just stole Kelley from Lexington and they’ve also filed to offer the same for contractors.
When the dust settles, what few carriers are left will be owned in some fashion by us taxpayers