Combined P/C Ratio Up More increases could erode future profits
The combined ratio, a key indicator of carrier profitability, was up in 2011 largely due to record catastrophe losses. In addition, releases of reserves in 2009 and 2010 helped lower ratios for those years. Significant releases are not expected in 2012. S&P U.S. Property/ Casualty 2012 Outlook * Estimate is 106% - 110%
2007 2008 95.7
101.0
2009 99.3
2010 100.8
2011* 110.0
Holding Steady and Positioned for Growth P&C Market Not Expecting Major Changes in 2012
O
ne might assume that rates are likely to soar in 2012. 2011, after all,
experienced a record number of catastrophic losses. But Willis Group Holdings predictions point to only slight changes in property and casualty insurance rates in 2012. The company’s Marketplace Realities report suggests rates will hold steady because the marketplace has become more efficient over the years. Although carriers’ profits decreased in 2011, they’re still realizing profits with lower premiums. This resilience points to a smart and flexible industry that can react to and handle uncertainties and catastrophes.
Looking toward the future, the report recommends the industry focus efforts on where demand is. For example, as government debt increases, new opportunities may develop from disasters with recovery efforts supported by agencies like FEMA.
The Marketplace Realities report includes 2012 predictions for employee benefits, cyber risk, errors and omissions and other insurance coverages.
Overall, the insurance industry has a solid foundation and is positioned for growth more
than ever before. Marketplace Realities; Willis North America, Inc., October, 2011