III analyst survey indicates inadequate U.S. returns for 2003

A survey conducted by the Insurance Information Institute (III) of 12 industry investment analysts suggests that growth in premium income within the U.S. property and casualty insurance industry will decrease in 2003. The analysts also forecast a drop in the combined ratio to an average of 103.3% for 2003 compared with this year’s 106.3%.
The III analyst survey predicts an average 12.3% increase in net written premiums for 2003 against the 13.6% gain expected for this year. While the predicted combined ratio of around 103.3% for 2003 would be the second lowest level achieved over the past two decades, underperforming investment growth will undermine the industry’s ability to achieve the necessary 10%-15% return on equity sought by investors, the III observes. “In the current investment environment, combined ratios must fall below 95% before the industry financial performance approaches consistency with the risks it assumes. In short, 2003 is way too soon for the hard market to end for most insurers,” says III chief economist Robert Hartwig.