2001 Marks First-Ever Net Loss for the Property/Casualty Insurance Industry By Michelle Logsdon - April 18, 2002The attacks of Sept. 11 and poor investment results are to blame for the first annual overall net loss for car, home and business insurers.
According to a report by the Insurance Services Office, Inc. (ISO) and the National Association of Independent Insurers (NAII) the industry suffered a $7.9 billion net loss after taxes in 2001. That number sharply contrasts with the 2000 figure of $20.6 billion in net income.
“Most experts estimate losses, including workers’ compensation and liability lines, from the September 11 attack[s] at somewhere between $30 billion and $70 billion [worldwide],” said John J. Kollar, ISO vice president — consulting and research.
Kollar said U.S. insurers only reported $10 billion in net underwriting losses due to the terrorist attacks but that number could jump to $25 billion if a slew of liability claims are successful.
“Many victims of the attack still appear to be weighing whether to seek compensation from private sources or to forgo compensation from private sources and accept compensation from the federal government,” said Kollar. “And, insurers may still be trying to resolve business interruption and other complex claims.”
Several reliable investment returns turned out to be not so reliable in 2001 for insurers. Net investment income for the industry was $37.1 billion. That’s a record 8.9 percent lower than the $40.7 billion in 2000.
To top it off, the Federal Reserve Board cut a key benchmark interest rate 11 times that year. The rate started the year at 6.5 percent and ended the year at 1.75 percent.
Still, there was some positive activity in the industry’s financials last year. “Premium growth perhaps was the only bright spot in the industry’s otherwise bleak numbers. Last year’s 8.1 percent increase in premiums is more than twice the 3.4 percent growth in the economy as measured by current dollar GDP,” said Kollar.
The ISO/NAII study was based on reports of insurers that constitute 96 percent of the U.S. property/casualty insurance industry. |