Leaders of the property/casualty insurance industry believe the worst of the
financial crisis is over and that the industry is now in the early stages of
a hard market, according to a survey conducted by the Insurance Information
Institute (I.I.I.) at its 16th annual Property/Casualty Insurance Joint Industry
Forum, held here. Seventy-five percent of executives in the property/casualty
industry expect an improvement in profitability in 2012; and in fact, 72 percent
believe the industry is on the road to recovery.
"The consensus among forecasters is for growth of the U.S. economy in 2012
at a little over a 2 percent annual rate, net of inflation," said Dr. Steven
Weisbart, senior vice president and economist with the I.I.I. "In that
scenario, the demand for property/casualty insurance will increase modestly,
both in terms of personal and commercial coverages," he said. "The
industry is well capitalized to provide this additional coverage and to pay
claims under it without difficulty. Rates will be determined, as they
should be, by state- and local-level market conditions, recognizing the
impact of inflation on claims and the effect of lower investment income
than the industry has earned in prior years."
Looking at the industry's profitability, a majority of industry leaders
believe that profits will improve in most property/casualty lines. Broken
down by lines of insurance, 63 percent of respondents believe there will
be an improvement in personal auto and 67 percent expect an improvement
in homeowners. While 72 percent of respondents expect an improvement in
commercial lines, 55 percent do not expect an improvement in workers
compensation.
Sixty-seven percent of respondents believe that premium growth will be
higher; 31 percent believe it will remain flat, and only 2 percent believe
it will be negative. In terms of capacity, as measured by policyholders'
surplus, 56 percent of respondents expect it to increase; 35 percent
believe it will remain flat; and 9 percent believe it will decrease.
More...
Federal Insurance Office (FIO) Director Michael McRaith said he has
received close to 150 comment letters from the industry with recommendations
on how to improve the regulatory system. McRaith noted during a speech
last week at the Property/Casualty Insurance Joint Industry Forum that
the FIO also held dozens of meetings with industry participants in the
past few months. PIA National filed
formal comments with the FIO and
met with McRaith at his request to discuss PIA's views on insurance
regulation. McRaith says there is a great deal of difference of opinions
regarding marketplace and prudential oversight. The FIO report is
scheduled to be released this month.
During his speech, McRaith reiterated the FIO is not looking to duplicate
state regulation nor increase paperwork burdens for insurers. He reiterated
that the FIO is not a regulator and that states will maintain control over
regulations. However, if you carefully read the text of McRaith's
remarks, you can discern hints of possible overreach in the near future.
McRaith said: "Another key responsibility of the FIO is to 'monitor all
aspects of the insurance industry.' Of course, different people have
offered different views of what monitoring will look like and what
constitutes an 'aspect' of the insurance industry. Circumstances
will largely influence our focus at times, but it definitely does not
mean that FIO will sit idly by while the world spins. FIO is poised to
be flexible enough not only to be responsive to current events affecting
the insurance industry, but also to take the lead in facilitating
dialogue and direction regarding the insurance sector both nationally
and internationally. FIO will be increasingly well-suited to be engaged
and assertive…" [our emphasis added]
What It Means to Agents: What needs
to be closely monitored is the FIO, to ensure that it does not attempt
to break out of its Congressionally-mandated restraints and assume the
role of insurance regulator.
It is of concern to hear that the FIO is "poised" to "take the lead in facilitating"
"direction" of the insurance sector "nationally" and will be "increasingly well
suited to be engaged and assertive." The risk here is that FIO may be poised
to try to expand its mandate by asserting authority it has not been granted —
not an uncommon gambit in Washington, D.C.
PIA Comments to FIO (filed 12/19/11)
FIO Hears Industry Arguments on Regulation (National Underwriter 12/21/11)
