Industry poised for success in 2002, says S&P

A new report from rating agency Standard & Poor’s (S&P) says the industry is headed for a comeback in 2002, with 2003 set to be a highly profitable year for insurers.Despite heavy losses following the September 11 terrorist attacks, the largest the insurance industry has ever seen, there is renewed interest in investment in the industry and new capital raising initiatives underway.Both the spread of the losses, which were shared among many companies in a variety of countries, and the anticipated acceleration of rate hardening are helping to boost the industry. “The industry is also finding crucial support from investors and lenders drawn to the much firmer pricing environment and increased profitability that inevitably follow a major insurance catastrophe,” states an S&P press release.Although there is reduced capacity, there will also be increased demand, the report notes. “Rate increases of 100% or more on loss-exposed policies are note unusual.” And it predicts commercial policies renewed at the beginning of 2002 will see increases above the 20% range.At the same time, comments in a newsletter published by the Association of Lloyd’s Members (ALM) have come under criticism for calling the events of September 11 a “historic opportunity”. The comments refer to the impact of the terrorist attacks on the hardening market, which most sources feel has been greatly accelerated. Lloyd’s is quick to point out that the newsletter is not published by the market, but by an independent association of members, or names.The newsletter notes that rates in some lines, such as aviation insurance, are seeing dramatic increases. And overall, rates have risen an average of 40% since September 11. The ALM also notes that rate increases were being seen in advance of the terrorist attacks.