The Impact of the Economic Crisis on the P&C Insurance Industry

Commercial insurance follows a boom-and-bust pricing cycle that, conventional wisdom proclaims, is largely uncorrelated with broader economic cycles. But the current recession is different. The severity of the economic crisis will adversely impact both the top lines and bottom lines of commercial insurers, making for a turbulent 2009.

The Impact of the Economic Crisis on the P&C Insurance Industry, a new briefing from Advisen Ltd., examines the economic factors influencing insurer profitability and the commercial insurance pricing cycle. Inevitably, capital-draining developments like recession-driven fraud losses, in conjunction with stagnant capital markets, will lead to a "hard" market. However, the hard phase of this market cycle will be materially different from prior cycles. The economic crisis will cause exposure units to shrink, businesses to fail, and force companies to consider budget-cutting measures such as higher retentions and lower limits. This falloff in demand will result in a top-line premium decline across the industry, substantially offsetting gains from higher rates.

The current recession is likely to be the worst economic downturn since the Great Depression. The Impact of the Economic Crisis on the P&C Insurance Industry provides brokers, underwriters and risk managers with essential information about the unprecedented forces shaping today's commercial insurance market.

Advisen's The Impact of the Economic Crisis on the P&C Insurance Industry, a 15-page report, can be purchased at http://corner.advisen.com/reports_topical_impact_economic_crisis_pc.html for $299.

This briefing was written by John W. Molka III, CFA, Senior Industry Analyst and Editor, 212.984.2753, [email protected].