Magazine article Risk Management

Seven Signs the Market Is Hardening

Magazine article Risk Management

Seven Signs the Market Is Hardening

Article excerpt

There is much debate over whether or not the insurance market is hardening. Some believe it has yet to see the rising prices and decreased capacity indicative of a hardening market. They note that some carriers are trying to gain market share by lowering price. So, is a hard market coming? Looking at the general indicators of a hard market helps answer the question--especially considering every factor trends negatively.

1. Lower Underwriting Profits

In 2007 and 2008, the market saw negative premium growth for the first time since 1943.

2. Increased Combined Ratio

In 2007, the combined ratio (losses in claims plus overhead divided by premiums) for the insurance industry was 94%, which increased to 106% in 2008. (A combined ratio over 100% is unprofitable for insurers. The 106% ratio means insurers were paying out $106 dollars for every $100 of premium collected).

3. Lack of Investment Income

The industry can no longer make up for unprofitable underwriting through investments. …

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