U.S. P/C industry boosts claims-paying resources by US$55.7 billion in 2006

The Insurance Information Institute (I.I.I.) estimates U.S. property and casualty insurers boosted by US$55.7 billion its cumulative claims-paying resources in 2006, a number equal to 93% of the US$59.8 billion in expected net income.
The US$55.7-billion figure was a near record, second only to the US$62-billion increase in 2003, as insurers worked to recover from the Sept. 11, 2001 terrorist attacks.
“With elevated hurricane activity predicted over the next 15 to 20 years, insurers took advantage of last year’s respite to fix the roof while the sun was shining, setting aside billions to bolster the industry’s claims-paying capacity,” according to an I.I.I. press release.
At the same time, insurers are lowering rates for most drivers, many homeowners and a wide variety of businesses, the I.I.I. observed.
“Insurers directed a significant share of their 2006 profits and investments back into the business,” said Dr. Robert Hartwig, the president and chief economist for the I.I.I.
Dr. Hartwig added that excellent underwriting results, the substantial drop in catastrophe losses and strong investment performance enabled insurers to reinvest billions of dollars in 2006, allowing claims-paying resources to reach an all-time record high estimated at US$481.5 billion.
“This reinvestment by the industry comes at a critical time for insurers and consumers alike,” Dr. Hartwig said. “The industry is bolstering its capital position in advance of what is already predicted to be a 2007 hurricane season that is 40% above average.” Insurers paid out more than US$80 billion in insured losses during the 2004 and 2005 hurricane seasons.
Policyholder surplus a key measure of claims-paying capacity or capital increased by an estimated 13% overall. The surplus increased to an estimated US$481.5 billion in 2006 from US$425.8 billion at year-end 2005.