Wednesday, October 18, 2006

'Sweet are the uses of adversity'

Eugene R. Anderson, the founder of my firm, Anderson Kill & Olick, and William G. Passannante, the co-chair of our insurance recovery practice, explain how, despite the insurance industry's constant cries of "wolf!" following disasters, "a simple formula protects insurance industry profits: raise rates, reduce coverage and deny claims":

According to media reports, the industry is "reeling from an estimated $56 billion of hurricane-related losses" (Wall Street Journal); "still reeling from the aftermath of 2005's record setting storms" (Best's Review); "reeling from the scale of the disaster (Washington Post), etc., etc.

Yet in calm sessions of sweet silent thought, insurance executives might agree with Shakespeare: "Sweet are the uses of adversity, which like the toad, ugly and venomous, wears yet a precious jewel in his head." From the venomous head of the hurricanes, the insurance industry has reaped the "precious jewel" of outsized profits.

The Insurance Information Institute (III) reports that property-casualty insurance
carriers in 2005 earned a record $48.8 billion and increased their surplus to over $427 billion. Industry experts are forecasting a $60 billion industry profit in 2006, and the III boasts that current underwriting performance -- the profit derived from premiums minus claims payouts, excluding investment income -- is "the best in a generation (or two)." See Industry Financials and Outlook here.

If anyone's reeling, it's policyholders.

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