Wilma, Katrina, et al hammered insurer profits almost as badly as they hit the Gulf Coast, resulting in the insurance industry losing $2.8 billion during the first three quarters of 2005. There is actually good news in this, as the losses forced insurers to stop cutting prices, thereby starting a downward trend in industry financials.
According to “Insurance Journal”,
“Before Hurricane Katrina, rate decreases and competition on many lines began to emerge throughout the majority of 2005. However, following this event, the trend of rate declines reversed on some lines of business, particularly in those areas directly impacted by the hurricane, and stalled on others. While this rate environment will have a positive impact on future results, A.M. Best believes the retreat from rate decreases will be short-lived.
The insurance industry’s cycles are well-known and well-documented – it marches off the same cliff over and over again, each time promising itself that it won’t be that stupid again.
History predicts otherwise.
I’d expect rates to stay somewhat firm, as early forecasts are for a storm season every bit as fierce as the one just passed. And, it is coming up in a few short months.
What does this mean for you?
A chance to tell me what a lousy prognosticator I am if rates plummet.
Feb
17
