Editor’s Note: Springing Back

Despite losses from the 2005 hurricane season, property and casualty insurance company failures de-clined 44 percent from the previous year.

In the insurance world catastrophes pretty much defined what 2005 was all about; 2004, as well, for that matter. As devastating as all the hurricanes, tsunamis and earthquakes were for the people who suffered from them, the insurance industry seems at least to have held its own, economically speaking, through the events of the last couple of years.

A recent report from Weiss Ratings Inc. indicates that despite losses from the 2005 hurricane season, property and casualty insurance company failures declined 44 percent from the previous year, “dropping from 16 to nine, while solid economic growth resulted in no bank closures in 2005.” Weiss Ratings, which provides ratings and analyses of financial services companies, mutual funds and stocks, also noted that “three life and health insurers failed compared to four in 2004, while the number of HMO insolvencies remained level at three.”

In his annual Earlybird Forecast, meanwhile, Dr. Robert P. Hartwig, Ph.D., senior vice president and chief economist with the Insurance Information Institute, said that despite record catastrophe losses that “will weigh heavily on 2005’s underwriting results,” property/casualty insurers are expected to “spring back in 2006 with a strong underwriting performance sufficient to generate a small underwriting profit.” Hartwig also noted that analysts predict a “spike in premium growth in 2006.” (See Dr. Hartwig’s analysis on p. 118.)

According to Weiss Ratings, however, 15 insurers and HMOs did succumb to economic pressures in 2005. Of those companies that failed, four were in Texas and one was in Louisiana: Reliant American Ins. Co., Texas; Financial Insurance Co., Texas; Amil International Inc., Texas; States General Life Ins. Co., Texas; and Benton Life Ins. Co. Inc., La.

Here’s hoping insurance companie failures will continue to decline in the coming year and that the upbeat predictions for the industry as a whole will turn out to be well-founded. Most of all, here’s hoping no catastrophes will befall us in 2006 and that there will be no need to “spring back.”

Until next time, happy reading!