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Financial Crisis and the State of the P/C
Insurance Industry Challenges Amid the
Global Economic Storm
Robert P. Hartwig, Ph.D., CPCU, PresidentInsurance Information Institute 110 William Street New York, NY 10038
Tel: (212) 346-5520 [email protected] www.iii.org
Informational Hearing of the Connecticut Insurance and Real Estate Committee
Hartford, CTJanuary 6, 2009
Insurance: One of Connecticut’s Most Critical Industries
Industry’s Economic Contributions at a Glance
• Insurers Contribute $15 Billion to the CT Economy
• Insurers Employee 74,000 people directly and support
twice as many indirectly
• Payroll Expenditures Total $8.6 Billion Annually
Source: Insurance Information Institute.2
Critical Differences Between P/C
Insurers and BanksSuperior Risk Management Model
& Low Leverage Makea Big Difference
Reasons Why P/C Insurers Have Fewer Problems Than Banks
• Superior Risk Management Model Insurers overall approach to risk focuses on underwriting discipline: implies
pricing accuracy and management of potential loss exposure Banks eventually sought to maximize volume, disregarded risk
• Low Leverage Insurers do not rely on borrowed money to underwrite insurance or pay claims
• Conservative Investment Philosophy High quality portfolio that is relatively less volatile and more liquid
• Strong Relationship Between Underwriting and Risk Bearing Insurers always maintain a stake in the business they underwrite, keeping “skin in
the game” at all times Banks and investment banks package up and securitize, severing the link between
risk underwriting and risk bearing, with (predictably) disastrous consequences• Tighter Regulation
Insurers are more stringently regulated than banks, investment banks & hedge funds
• Greater Transparency Insurer companies are an open book to regulators and the public
Source: Insurance Information Institute4
How Insurance Industry Stability Has Benefitted Consumers
BOTTOM LINE:• Insurance Markets—Unlike Banking—Are Operating
Normally• The Basic Function of Insurance—the Orderly Transfer
of Risk from Client to Insurer—C ontinues Uninterrupted• This Means that Insurers Continue to:
Pay claims (whereas 25 banks have gone under) Renew existing policies (banks are reducing and eliminating
lines of credit) Write new policies (banks are turning away people who want
or need to borrow) Develop new products (banks are scaling back the products
they offer)
Source: Insurance Information Institute5
Leverage Ratios for InvestmentBanks and Traditional Banks*
33.0
24.3
23.3
21.5
15.4
13.3
12.4
10.8
10.5
44.0
0 10 20 30 40 50
Merrill Lynch
Morgan Stanley
Goldman Sachs
Lehman Brothers
Fannie Mae
Citibank
JP Morgan Chase
Wells Fargo
Wachovia
Bank of America
*Based on data for last quarter reported (May or June 2008).Source: “The Perils of Leverage,” North Coast Investment Research, Sept. 15, 2008
Investment bank leverage ratios were extremely high.
Lehman filed for bankruptcy 9/15/08
Merrill merged with JP Morgan Chase
Goldman and Morgan converted to bank holding companies
6
How Does Leverage Work?
• Example of Non-Leveraged Transaction Buy 1 share of stock for $100 Price of share rises to $110 RETURN = $10 or 10%
• Leveraged Transaction Invest $10 and borrow $90 Stock rises to $110 RETURN = $10 or 100% (less borrowing costs)
• This Pleasant Arithmetic Works Equally Unpleasantly in the Opposite Direction
• Declining asset values, seizing of credit markets made such borrowing impossible and the operating model of investment banks nonviable
Source: Insurance Information Institute.
Investment banks and others juiced their returns
by making big, bad bets with (mostly) borrowed
money on mortgage securities
7
The Financial Crisis in PerspectiveBank vs. Insurer Impacts
$600
$106
$780
$205
$0
$100
$200
$300
$400
$500
$600
$700
$800
Banks Insurers
Losses as of Sept 2008
Total expected losses
Financial Institutions Globally FacingHuge Losses from the Credit Crunch*
*Global losses since the beginning of 2007.Source: IMF Global Financial Stability Report, October 2008, IIF, Bloomberg, cited in a presentation by Thomas Hess (Chief Economist, Swiss Re) October 23, 2008, accessed via Geneva Association web site.
Billions
The IMF estimates total “credit- turmoil-related” losses will
eventually amount to $1.4 trillion
$205B or 20.8% of estimated total (bank+insurer) losses will be
sustained by insurers worldwide
9
Top 10 Largest Bank Failures
$12.2 $13.0 $15.1 $18.5 $21.7 $30.2 $32.0 $32.5 $40.0
$307.0
$0
$50
$100
$150
$200
$250
$300
$350
Hom
efed
Ban
k(1
992,
San
Die
go)
Fir
st C
ity
Ban
corp
orat
ion
(198
8, H
oust
on)
Gib
ralt
arS
avin
gs (
1989
,S
imi V
alle
y)
Mco
rp (
1989
,D
alla
s)
Ban
k o
f N
ewE
ngl
and
(19
91,
Bos
ton
)
Am
eric
anS
avin
gs &
Loa
n(1
988,
Sto
ckto
n,
Ind
yMac
(20
08,
Pas
aden
a)
Fir
st R
epu
blic
(198
8, D
alla
s)
Con
tin
enta
lIl
linoi
s (1
984,
Ch
icag
o)
Was
hin
gton
Mu
tual
(20
08,
Sea
ttle
)
$ B
illi
ons
Source: FDIC; Insurance Information Institute research.
Resurgent bank failures (25 in 2008) are
symptomatic of weakness in the financial system. FDIC says many more
may failFailure of IndyMac was the 4th largest in
history
Sept. 25 failure of Washington
Mutual was bar far the largest in
US history. Sold to JP Morgan Chase by govt. for $1.9B
plus WaMu’s loans and deposits
10
US Bank Failures:* 1995-2008
86
13
8 7
4
11
3 4
0 0
3
25
0
5
10
15
20
25
30
95 96 97 98 99 00 01 02 03 04 05 06 07 08*
Through December 31, 2008
Remarkably, as recently as 2005 and 2006, no banks
failed—the first time this had happened in FDIC history
(dating back to 1934)
*Includes all commercial banking and savings institutions. Source: FDIC: http://www.fdic.gov/bank/historical/bank/index.html; Insurance Info. Institute
Bank failures are up sharply. 25 banks (but no p/c or life
insurers) failed in 2008 due to the financial crisis, including the largest in history—Washington Mutual with $307B in assets.
11
US Bank Failures:* 1934-2008**
0
100
200
300
400
500
600
34
36
38
40
42
44
46
48
50
52
54
56
58
60
62
64
66
68
70
72
74
76
78
80
82
84
86
88
90
92
94
96
98
00
02
04
06
08
Through December 31, 2008
Great Depression
355 failures between 1934 and 1940*
Savings & Loan Crisis
2808 depository institutions failed between 1982 and 1992;
*Includes all commercial banking and savings institutions.**Data begin in 1934, the year the FDIC was established.Source: FDIC: http://www.fdic.gov/bank/historical/bank/index.html; Insurance Info. Institute
The S&L bailout cost taxpayers as much as
$160 billion. The current bailout could cost the government
much more.
Current Financial Crisis
25 banks (but no p/c or life insurers) have failed so far in
2008
12
Top 10 P/C Insolvencies, Based Upon Guaranty Fund Payments*
$2,265.8
$1,272.7
$1,049.7$843.4
$699.4$566.5 $555.8 $543.1 $531.6 $516.8
$0
$500
$1,000
$1,500
$2,000
$2,500
* Disclaimer: This is not a complete picture. If anything the numbers are understated as some states have not reported in certain years.
Source: National Conference of Insurance Guaranty Funds, as of September 17, 2008.
$ MillionsThe 2001 bankruptcy of Reliance Insurance was the largest ever among p/c insurers
13
Top 10 Life Insolvencies, Based On GuarantyFund Payments and Net Estimated Costs*
$2,821.7
$173.6 $172.4 $131.6 $107.8 $106.9 $81.9 $61.6 $61.5 $57.2$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Executive LifeIns. Co. 1991
Corporate LifeIns. Co. 1994
NationalHeritage LifeIns. Co. 1995
LondonPacific Life &Annuity Co.
2004
Inter-American Ins.Co. of Illinois
1991
GuaranteeSecurity LifeIns. Co. 1992
New JerseyLife Ins. Co.
1993
AmericanChambers LifeIns. Co. 2000
AmericanIntegrity Ins.
Co. 1993
First NationalLife Ins. Co.of America
1999
*As of 2007.
Source: National Organization of Life and Health Guaranty Funds
$ Millions(Year Indicates Year of Liquidation)
The 1991 bankruptcy of Executive Life was by far the largest ever
among life insurers
14
FINANCIAL STRENGTH &
RATINGS Industry Has Weathered
the Storms Well
P/C Insurer Impairments,1969-2007
81
51
27
11
93
49
13
12
19
91
61
41
33
64
93
1 34
49
49
54
60
58
41
29
15
12
31
18 19
49 50
47
35
18
13 15
4
0
10
20
30
40
50
60
70
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
The number of impairments varies significantly over the p/c insurance cycle,
with peaks occurring well into hard markets
Source: A.M. Best; Insurance Information Institute
P/C Insurer Impairment Frequency vs. Combined Ratio, 1969-2007
90
95
100
105
110
115
120
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
Co
mb
ine
d R
ati
o
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
Imp
air
me
nt
Ra
te
Combined Ratio after DivP/C Impairment Frequency
Impairment rates are highly correlated
underwriting performance and could reached a
record low in 2007
Source: A.M. Best; Insurance Information Institute
2007 impairment rate was a record low 0.12%, one-seventh the 0.8% average since 1969;
Previous record was 0.24% in 1972
Reasons for US P/C Insurer Impairments, 1969-2005
*Includes overstatement of assets.
Source: A.M. Best: P/C Impairments Hit Near-Term Lows Despite Surging Hurricane Activity, Special Report, Nov. 2005;
Catastrophe Losses8.6%
Alleged Fraud11.4%
Deficient Loss
Reserves/In-adequate Pricing62.8%
Affiliate Problems
8.6%
Rapid Growth
8.6%
2003-2005 1969-2005
Deficient reserves,
CAT losses are more important factors in
recent years
Reinsurance Failure3.5%
Rapid Growth16.5%
Misc.9.2%
Affiliate Problems
5.6%
Sig. Change in Business
4.6%
Deficient Loss
Reserves/In-adequate Pricing38.2%
Investment Problems*
7.3%
Alleged Fraud8.6%
Catastrophe Losses6.5%
P/C INSURANCE FINANCIAL
PERFORMANCE
A Resilient Industry in Challenging Times
Profitability
Historically Volatile
P/C Net Income After Taxes1991-2009F ($ Millions)*
$14,
178
$5,8
40
$19,
316
$10,
870
$20,
598
$24,
404 $3
6,81
9
$30,
773
$21,
865
$3,0
46
$30,
029
$61,
940
$5,4
21
-$6,970
$65,
777
$44,
155
$20,
559
$38,
501
-$10,000
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
08F
*ROE figures are GAAP; 1Return on avg. surplus. 2008 numbers are annualized based on 9-mos. Actual of $4.066 billion.Sources: A.M. Best, ISO, Insurance Information Inst.
2001 ROE = -1.2%2002 ROE = 2.2%2003 ROE = 8.9%2004 ROE = 9.4%2005 ROE= 9.4%2006 ROE = 12.2%2007 ROAS1 = 12.3%2008 ROAS = 1.1%*
Insurer profits peaked in 2006.
21
-5%
0%
5%
10%
15%
20%
25%
75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 06 08
1975: 2.4%
1977:19.0% 1987:17.3% 1997:11.6% 2006:12.2%
1984: 1.8% 1992: 4.5% 2001: -1.2%
10 Years10 Years
9 Years
Note: 2008 figure is actual 9-month result.Sources: ISO; Insurance Information Institute.
2008F: 1.1%
P/C Insurance Industry ROEs,1975 – 2008E*
22
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08*
ROE Cost of Capital
ROE vs. Equity Cost of Capital:US P/C Insurance:1991-2008:Q3
*Excludes mortgage and financial guarantee insurers.Source: The Geneva Association, Ins. Information Inst.
The p/c insurance industry fell well short of is cost of capital in 2008
-13.
2 p
ts
US P/C insurers missed their cost of capital by an average 6.7 points from 1991 to 2002, but on
target or better 2003-07
-1.7
pts
+2.
3 p
ts
-9.0
pts
The cost of capital is the rate of return
insurers need to attract and retain
capital to the business
-9.7
pts
23
Investment Performance
Investments are the Principle Source of Declining
Profitability
Distribution of P/C Insurance Industry’s Investment Portfolio
Cash & Short-Term Investments
7.2%
Common Stock17.9%
Bonds66.7%
Preferred Stock1.5%
Real Estate0.8%
Other5.9%
Portfolio Facts
•Invested assets totaled $1.3 trillion as of 12/31/07
•Insurers are generally conservatively invested, with 2/3 of assets invested in bonds as of 12/31/07
•Only about 18% of assets were invested in common stock as of 12/31/07
•Even the most conservative of portfolios was hit hard in 2008
Source: NAIC; Insurance Information Institute research;.
As of December 31, 2007
25
Property/Casualty Insurance Industry Investment Gain:1994- 2008:Q3 1
$ Billions
$35.4
$42.8$47.2
$52.3
$44.4
$36.0
$45.3$48.9
$59.4$55.7
$63.6
$28.3
$56.9$51.9
$57.9
$0
$10
$20
$30
$40
$50
$60
1Investment gains consist primarily of interest, stock dividends and realized capital gains and losses. 2006 figure consists of $52.3B net investment income and $3.4B realized investment gain. *2005 figure includes special one-time dividend of $3.2B.Sources: ISO; Insurance Information Institute.
Investment gains are off sharply in 2008 due to lower yields and poor equity market conditions.
26
P/C Insurer Net Realized Capital Gains, 1990-2008:Q3
$2.88$4.81
$9.89
$1.66
$6.00
$9.24$10.81
$13.02
$16.21
$6.63
-$1.21
$6.61
$8.97
-$9.71
$18.02
$3.52
$9.70$9.13$9.82
-$10-$8-$6-$4-$2$0$2$4
$6$8
$10$12$14$16$18$20
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
08:Q
3
Sources: A.M. Best, ISO, Insurance Information Institute.
Realized capital gains exceeded $9 billion in 2004/5 but fell sharply in
2006 despite a strong stock market. Nearly $9 billion again in 2007, but
$-9.7 billion in 2008 through Q3.
$ Billions
27
-45%
-35%
-25%
-15%
-5%
5%
15%
25%
35%
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008*
Source: Ibbotson Associates, Insurance Information Institute. *Through December 31, 2008.
Total Returns for Large Company Stocks: 1970-2008*
S&P 500 was down 38.5% in 2008*
The market crash of 2008 was the largest since 1931
28
23.1
18.4
15.5
12.7
13.9
12.4 1
6.4
22.4 25.6
24.4
23.3 25.8
27.3
22.0
15.5
12.8
12.8 1
7.5
28.6
26.0
25.5
27.1
21.6
18.3 2
2.1 24.3
20.7
30.2
61.2
62.6
51.8
0
10
20
30
40
50
60
70
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08F
Jan
-08
Feb
-08
Mar-
08
Ap
r-08
May-0
8
Ju
n-0
8
Ju
l-08
Au
g-0
8
Sep
-08
Oct
-08
Nov-0
8
Dec
-08
Sources: Chicago Board Options Exchange: http://www.cboe.com/micro/vix/historical.aspx
*Through December 31, 2008.
VIX Volatility Index: Stock Market Volatility at Record Highs in 2008*
Stock market volatility is at its highest levels since the 1930s, pushing the VIX Volatility Index (a.k.a.
“Investor Fear Gauge”) to record highs in 2008
VIX is an indicator of market volatility
over the next 30 days
VIX Interpretation
VIX >30: Extreme Volatility
VIX<20: Low Volatility
Average: 1990-2008* = 19.49
29
Underwriting Trends
Financial Crisis Does Not Directly Impact Underwriting
Performance: Cycle, Catastrophes Were 2008’s Drivers
90
95
100
105
110
115
120
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08F
Combined Ratios
1970s: 100.3
1980s: 109.2
1990s: 107.8
2000s: 102.0*
Sources: A.M. Best; ISO, III *A.M. Best year end estimate of 103.2; Actual 9-mos. result was 105.6.
P/C Insurance Combined Ratio, 1970-2008F*
31
115.8
107.5
100.198.4
100.8
92.6
103.2101.2
95.7
90
100
110
120
2001 2002 2003 2004 2005 2006 2007 2008 2008*
P/C Insurance Industry Combined Ratio, 2001-2008E
*Includes Mortgage & Financial Guarantee insurers. Sources: A.M. Best, ISO; III.
2005 ratio benefited from heavy use of reinsurance which lowered net losses
Best combined ratio since 1949
(87.6)
As recently as 2001, insurers paid out nearly $1.16 for every
$1 in earned premiums
Relatively low CAT
losses, reserve releases
Including Mortgage
& Fin. Guarantee insurers
Cyclical Deterioration
32
-55-50-45-40-35-30-25-20-15-10-505
101520253035
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
Source: A.M. Best, ISO; Insurance Information Institute * Includes mortgage & finl. guarantee insurers
$ B
illi
ons
Insurers earned a record underwriting profit of $31.7 billion in 2006, the largest ever but only the
second since 1978. Cumulative underwriting deficit from 1975 through 2007 is $422 billion.
Underwriting Gain (Loss)1975-2008:Q3*
$19.877 Bill underwriting loss in 08:9M incl. mort. & FG insurers
33
Number of Years With Underwriting Profits by Decade, 1920s –2000s
67
10
8
45
0 0
3
0
2
4
6
8
10
1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s*
Note: Data for 1920 – 1934 based on stock companies only.Sources: Insurance Information Institute research from A.M. Best Data. *2000 through 2008.
Number of Years with Underwriting ProfitsUnderwriting profits were common before the 1980s (40 of the 60 years
before 1980 had combined ratios below 100)—but then they vanished. Not a single underwriting profit was recorded in the 25 years from 1979
through 2003.
34
U.S. Insured Catastrophe Losses*$7
.5
$2.7
$4.7
$22.
9
$5.5 $1
6.9
$8.3
$7.4
$2.6 $1
0.1
$8.3
$4.6
$26.
5
$5.9 $1
2.9 $2
7.5
$6.7
$24.
9$1
00.0
$61.
9
$9.2
$0
$20
$40
$60
$80
$100
$120
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
08**
20??
*Excludes $4B-$6b offshore energy losses from Hurricanes Katrina & Rita.**Based on PCS data through Sept. 30. PCS $2.1B loss of for Gustav. $10.655B for Ike of 12/05/08.Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01. Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B.Source: Property Claims Service/ISO; Insurance Information Institute
$ Billions2008 CAT losses already exceed 2006/07 combined. 2005 was by
far the worst year ever for insured catastrophe losses in the US, but the worst has yet to come.
$100 Billion CAT year is coming soon
35
Top 12 Most Costly Disasters in US History, (Insured Losses, $2007)
$4.0 $5.0 $6.0 $7.0 $7.8 $8.2$10.7 $10.9 $10.9
$22.0 $22.9
$43.6
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
Jeanne(2004)
Frances(2004)
Rita (2005)
Hugo(1989)
Ivan (2004)
Charley(2004)
Ike(2008)*
Wilma(2005)
Northridge(2004)
9/11Attacks(2001)
Andrew(1992)
Katrina(2005)
$ B
illi
ons
*PCS estimate as of 12/15/08.Sources: ISO/PCS; AIR Worldwide, RMS, Eqecat; Insurance Information Institute inflation adjustments.
9 of the 12 most expensive disasters in US history
have occurred since 2004
In 2008, Ike became the 6th most expensive insurance event and 4th most
expensive hurricane in US history
36
Capital/Policyholder
Surplus
Shrinkage, but Capital is Within Historic Norms
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
U.S. Policyholder Surplus: 1975-2008*
Source: A.M. Best, ISO, Insurance Information Institute. *Towers Perrin estimate as of 12/31/08
$ B
illi
ons
“Surplus” is a measure of underwriting capacity. It is analogous to “Owners Equity” or “Net Worth” in non-insurance organizations
Actual capacity as of 9/30/08 was $478.5, down 7.6% from 12/31/07 at $517.9B, but 68% above its 2002
trough. Recent peak was $521.8 as of 9/30/07. Estimate as of 12/31/08 is $438B is 16% below 2007
peak.
The premium-to-surplus ratio stood at $0.94:$1 at year end 2008, up from
near record low of $0.85:$1 at year-end 2007
38
Policyholder Surplus, 2006:Q4 – 2008:Q4(Est.)
$ Billions
$487.1$496.6
$512.8$521.8
$478.5
$438.0
$505.0$515.6
$517.9
$380
$400
$420
$440
$460
$480
$500
$520
$540
06:Q4 07:Q1 07:Q2 07:Q3 07:Q4 08:Q1 08:Q2 08:Q3 08:Q4
Source: ISO (historical); Towers Perrin (Oct. 21) estimates for Q4 2008. Q4 assumes no major Investment market recovery before year-end 2008.
Declines Since 2007:Q3 Peak
Q2: -$16.6B (-3.2%) Q3E: -$43.3B (-8.3%)
Q4E: -$84B (-16.1%)
Capacity peaked at $521.8 as of 9/30/07
39
P/C Premium Growth
Primarily Driven by the Industry’s Underwriting Cycle, Not the Economy
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
22%
24%
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Sources: A.M. Best, ISO, Insurance Information Institute
Strength of Recent Hard Marketsby NWP Growth
1975-78 1984-87 2000-03
Shaded areas denote “hard
market” periodsNegative growth in
2008. Is it a trough?
In 2007 net written premiums fell 1.0%, the first
decline since 1943
41
Year-to-Year Change in Net Written Premium, 2000-2008E*
*2008 figure is 9-month actual result from ISO.Source: A.M. Best (historical).
5.0%
8.4%
15.3%
10.0%
3.9%
0.5%
4.2%
-1.0% -0.4%2000 2001 2002 2003 2004 2005 2006 2007 2008F
P/C insurers are experiencing their
slowest growth rates since 1943
Slow growth means retention is critical
Protracted period of
negative or slow growth is possible due to soft
markets and slow
economy
42
THE ECONOMIC STORM
What a Weakening Economy Means for the P/C Insurance
Industry
Exposure Effects
