While more than 90 percent of property/casualty insurance industry executives say they expect renewal of the Terrorism Risk Insurance Act, the jury is out on whether commercial lines profits will rise in 2014, especially in the workers compensation line.
A survey conducted at the Property/Casualty Insurance Joint Industry Forum in New York Tuesday asked industry leaders for their outlook on 12 topics—ranging from TRIA reauthorization and the Biggert-Waters Flood Insurance Reform Act to the industry’s combined ratio and premium growth.
On the federal terrorism insurance backstop, 93 percent of those polled said they expect the Terrorism Risk Insurance Act, which is set to expire Dec. 31, 2014, to be reauthorized by Congress.
On the Biggert-Waters Flood Insurance Reform Act, 75 percent said they expect Congress to delay implementation. (A bipartisan spending bill unveiled last week in Washington, and passed in the House, could postpone for about eight months some flood insurance rate increases triggered by the Biggert-Waters Act.)
The survey also showed many executives are expecting a stricter regulatory environment in the year ahead—with 70 percent saying they believe the federal government is interested in further expanding its regulatory oversight of insurers.
When questions turned to profitability by line of business, however, there was a 50-50 split among the executives on the workers compensation line. And for commercial lines excluding comp, only 40 percent foresee improved profitability in 2014.
For the homeowners line, the 55 percent executives predict an industrywide profit decline.
Rolling up all lines together, 68 percent say the combined ratio will rise (underwriting profits will fall) in 2014.
Forum participants included nearly 250 representatives from P/C insurance and reinsurance companies and organizations. Of these, roughly 40 percent responded to the survey.
On the investment side, 83 percent said they expect another “up” year in the equity markets in 2014 (For the industry as a whole, equities constitute only about 15 to 20 percent of invested assets. About 70 percent of invested assets are in bonds.)
Industry leaders were also asked whether they expect interest rates to rise, fall or remain flat in 2014. Eighty percent said they expect interest rates to rise, while 20 percent said they expect interest rates to remain flat.
Looking at economic growth, 40 percent said they expect the U.S. economy to accelerate while 58 percent said they expect the economy to remain the same.
“Many economic forecasts say that the U.S. and most global economies will grow stronger in 2014, and this means a greater need to protect more assets and income, which leads to greater insurance premium volume,” said Steven Weisbart, senior vice president and chief economist with the Insurance Information Institute. “Both personal lines (auto and homeowners insurance) and commercial insurance will see increased exposures. 2013 was the industry’s most profitable year since the Great Recession, and 2014 could be even better, barring major catastrophe losses.”
Thirty percent of the executives said they expect premium growth to be higher in 2014; 42 percent said it would remain flat; and 28 percent said it would be lower.
In terms of capacity, as measured by policyholders’ surplus, 73 percent said they expect it to increase; 20 percent said it would remain flat; and 7 percent said it would decrease.
Below are the poll questions and full results.
Source: Insurance Information Institute
(A version of this article was published on Insurance Journal’s website last week. Reporter Young Ha, the East Coast editor of Insurance Journal, attended the Joint Industry Forum.)