Recession is Affecting Both the Supply of, and Demand for, Insurance Coverage
Advisen Ltd., the leading provider of exposure information, insurance market data, risk analytics, and workflow technology to commercial insurance executives, today released the findings of important new research into the influence of the global economic crisis on the commercial insurance industry. Commercial insurance follows a boom-and-bust pricing cycle that, conventional wisdom proclaims, is largely uncorrelated with broader economic cycles. But Advisen found that the current recession is different. The severity of the economic crisis will adversely impact both the top lines and bottom lines of commercial insurers, making for a turbulent 2009.
“While past recessions have influenced insurance pricing, no recession since World War II has influenced both supply and demand so profoundly,” said David Bradford, Advisen’s executive vice president and Chief Knowledge Officer. “Hard market conditions eventually will provide insurers and brokers some relief, but we see absolute top line income declining through 2009.”
The Impact of the Economic Crisis on the P&C Insurance Industry, the new Advisen briefing, examines the economic factors influencing insurer profitability and the commercial insurance pricing cycle. Inevitably, capital-draining developments like recession-driven fraud losses, in conjunction with stagnant capital markets, will lead to a “hard” market. However, the hard phase of this market cycle will be materially different from prior cycles. The economic crisis will cause exposure units to shrink, businesses to fail, and will force companies to consider budget-cutting measures such as higher retentions and lower limits. This falloff in demand will result in a top-line premium decline across the industry, substantially offsetting gains from higher rates.
“Four years of falling rates is putting stress on both insurers and brokers,” noted John Molka III, CFA, Advisen’s Senior Industry Analyst and the author of the briefing. “Under more stable economic conditions, the market would be poised for a rebound. But economic turbulence is adding a new layer of complexity to the pricing cycle. We’ve identified the various forces at work on insurers’ top and bottom lines, and how those forces are likely to influence pricing and capacity in 2009 and 2010.”
The Impact of the Economic Crisis on the P&C Insurance Industry provides brokers, underwriters and risk managers with essential information about the unprecedented forces shaping today’s commercial insurance market. This 15-page Briefing can be purchased at the Advisen Corner for $299.
About Advisen
Advisen integrates business information and market data for the commercial insurance industry and maintains critical risk analytics and time-saving workflow tools for over 530 industry leading firms. Through its work for the broadest customer base among information service providers, Advisen delivers actionable information and risk models at a fraction of the cost to have them built internally. Designed and evolved by risk and insurance experts, and used daily by more than 100,000 professionals, Advisen combines the industry’s deepest data sets with proprietary analytics and offers insight into risk and insurance that is not available on any other system. Advisen is headquartered in New York. For more information, visit http://www.advisen.com or call +1.212.897.4800 in New York or +44(0)20.7929.5929 in London.
Contacts:
Advisen
Mason Power, G.M.
+1-212-897-4796
Mobile:
+1-917-348-3998
mpower@advisen.com
