Rating agency predicts “worst year ever” for insurers

Rating agency Fitch is predicting 2001 will be the worst underwriting year ever for p&C insurers, largely as a result of the September 11 terrorist attacks. In a new report, Fitch notes that the industy will likely post its worst underwriting loss ever. Even if losses from the terrorist attacks are at the low end of the estimates, which range from US$30 billion US$70 billion, the industry will see a pretax operating loss. The combined ratio is expected to reach 115%.Should the final loss tally be in the middle to high end of the range of estimates, this combined ratio could jump as high as 118%, the highest level in the industry’s history, seen in 1984.These results will prompt sharp rate increases in 2002, Fitch reports. “This hard market will promote significant improvements in profitability going forward, and may also further differentiate the market’s “winners” from the “losers” in an environment characterized by flights to quality by insurance buyers.”That said, Fitch predicts the rate hikes may not lead to much improvement in 2002 returns, and insurers may have to wait several years for a return to profitable results.