End of the Storm? Losses Hit Insurance industry.(PAGE ONE)(SPECIAL REPORT)
Byline: Tom Ramstack, THE WASHINGTON TIMES
President Bush's signature on the terrorism insurance bill last week is ending one of the worst parts of "the perfect storm" for the insurance industry.
In the past two years, the insurance industry has been nearly ripped apart by a cataclysm of a poor stock market, runaway juries and terrorists.
Hard realities of business drove small insurers into bankruptcy and made even the largest companies dig into their cash reserves.
The terrorism insurance bill shields the insurance industry from catastrophic losses caused by terrorist attacks. One provision requires that taxpayers cover up to 90 percent of insured losses from major attacks, with the insurance industry paying up to the first $15 billion.
That provision is likely to rescue the industry from what many analysts call the worst time in insurance history.
The year 2001 started off poorly for insurance companies: Juries awarded huge payouts for asbestos claims, medical malpractice insurance rates drove doctors out of business, and homeowners saw their insurance rates climb from floods, storms and mold.
And the trial lawyers, as one industry analyst put it, "continued to run amok."
Then terrorists slammed airliners into the World Trade Center.
It was the worst insurance catastrophe in history. But then, corporate scandals pulled the stock market lower and took insurance companies' investments with them. The U.S. insurance industry has lost $20 billion in the last year.
"Last year's perfect storm produced a tsunami of misfortune for insurers," Robert Hartwig, chief economist for the Insurance Information Institute, said in a financial report. "Recession, underpricing, catastrophic losses, medical cost inflation, Enron, abuse of the legal system and, of course, the September 11 terrorist attack."
The past year, said John Morrison, the National Association of Insurance Commissioners legal issues task force chairman, was "the worst year ever."
Initially, specific groups were hit hardest by the industry's woes, such as high-risk doctors, homeowners in moist environments where toxic mold grows freely, ranchers overrun by Western fires, airlines and property owners near key government …
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: End of the Storm? Losses Hit Insurance industry.(PAGE ONE)(SPECIAL REPORT). Contributors: Not available. Newspaper title: The Washington Times (Washington, DC). Publication date: December 1, 2002. Page number: A01. © 2009 The Washington Times LLC. COPYRIGHT 2002 Gale Group.
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