North Dakota’s Sluggish Economy Will Hold Back P/C Growth

The U.S. Census Bureau’s 2000 census estimated the population of North Dakota at 642,200. About 84 percent of the adult residents had graduated from high school and about 22 percent had earned a bachelor’s degree or higher. The capital, Bismarck, has a population of 55,532.

From an employment perspective, the primary industries in North Dakota are:

From a property/casualty insurance perspective, North Dakota accounted for $1.1 billion in direct written premium in 2003. Countrywide the aggregate was $445 billion written. North Dakota’s calendar-year 2003 loss and defense and cost containment expense ratio of 57.6 percent was well below the comparable countrywide 2003 ratio of 67.6 percent. It was interesting to note that North Dakota’s homeowners loss ratio for calendar-year 2003 was 25 percent compared to the countrywide average of 61.2 percent. Homeowners insurance premium comprised 8 percent1 of the P/C premium written in North Dakota, compared to 10.8 percent countrywide.

What surprised me the most was that North Dakota farmowners insurance premium for calendar-year 2003 was $44.9 million. I expected it to be less. However, in a state with 5,299 farming, fishing and forestry employees, perhaps that is about right.

The North Dakota economy is stagnant. The employed civilian population comprises nearly one-half of North Dakota’s population. It is distributed as follows:

Given the anticipated growth in the number of jobs located in North Dakota and the need for diversification of the North Dakota economy, I would expect the growth rate of North Dakota’s P/C insurance marketplace, as measured by direct premium written, to lag the growth rate experienced on a countrywide basis.

Joseph L. Petrelli is president and founder of Demotech Inc., a Columbus, Ohio-based financial analysis and actuarial services firm. He is a member of the Casualty Actuarial Society, American Academy of Actuaries and the Conference of Actuaries in Public Practice.