Industry Executives Predict Tort Trends Likely to Remain Stable in 2008

Tort trends will likely remain stable in the year ahead, according to a survey conducted by the Insurance Information Institute.

Sixty-six percent of the executives polled believe that tort trends in 2008 will be little changed from 2007. However, 28 percent believe tort trends will deteriorate. Just 6 percent of those polled indicated tort trends would improve.

Nonetheless, respondents were very confident about wind versus water litigation. Eighty-percent of respondents indicated that wind versus water litigation was largely resolved in favor of the insurance industry.

When it comes to whether Congress will adopt a National Catastrophe Insurance Plan in 2008, 90 percent of respondents do not think it will occur. In addition, 70 percent of the insurance executives polled think the push for an Optional Federal Charter will not gain momentum on Capitol Hill in the year ahead.

Looking at the industry’s financial performance, a majority of industry leaders believes the market will continue to soften in most property/casualty lines.

Broken down by line of insurance, only 24 percent of respondents believe profitability will improve in personal auto and homeowners insurance, while 22 percent expect improvement in workers’ compensation. Overall, just 20 percent of respondents expect an improvement in commercial lines profitability in 2008.

Looking at consolidation, 80 percent of respondents thought there would be an increase both among insurers and reinsurers in 2008.

“Soft market conditions and the accumulation of excess capital have historically been catalysts for increased merger and acquisition activity in the property/casualty insurance industry,” said Dr. Robert Hartwig, president of the III.

Hartwig added that the last peak in merger and acquisition activity occurred in 1998 when the industry’s ratio of premiums written to policyholder surplus fell to a ratio of $0.84-to-$1, just two cents lower than the $0.86-to-$1 ratio record during the third quarter of 2007.

On the investment side, 54 percent of industry leaders expect the equity markets to have a down year.

The majority of insurance leaders — 56 percent — expect interest rates to fall in 2008, while 28 percent believe rates will remain flat.

On the political front, 72 percent of CEOs thought that the Democratic Party would win the White House in 2008.

For the full results, go to: www.iii.org/media/met/jif2008.

Topics Trends Market