Liability Trends, Issues and Jury Verdicts: Impact on Insurance Liability and Excess Casualty Markets Insurance Information Institute October 2003 Robert P. Hartwig, Ph.D., CPCU, Senior Vice President & Chief Economist Insurance Information Institute ♦ 110 William Street ♦ New York, NY 10038 Tel: (212) 346-5520 ♦ Fax: (212) 732-1916 ♦
[email protected] ♦ www.iii.org Presentation Outline • P/C Insurance Overview • Liability Issues • P/C Macro Cost Drivers • US Legal System: Is it Out of Control • Case Studies • Overview of Primary & Excess Liability Markets • Pricing & Profitability Considerations • Corporate Governance •Q&A P/C FINANCIAL OVERVIEW Highlights: Property/Casualty First Half 2003 2003 2002 Change Net Written Prem. 202,828 182,760 +11.0% Loss & LAE 142,129 134,897 +5.4% Net UW Gain (Loss) (2,070) (11,422) -81.9% Net Inv. Income 18,268 17,894 +2.1% Net Income (a.t.) 14,496 4,371 +231.6% Surplus* 312,455 284,300 +9.9% Combined Ratio 99.8 105.1 -5.3 pts. *Comparison with year-end 2002 Source: A.M. Best, Insurance Information Institute Information Source: A.M. Best, Insurance Note: Shaded areas denote -10% 10% 15% 20% 25% -5% 0% 5% 1970 1971 Strength ofRecent HardMarkets 1972 1973 1974 1975 1975-78 hard market periods. 1976 1977 by RealNWP Growth 1978 1979 1980 1981 1982 1983 1984 1985 1985-87 2001-03 1986 *2003 figure is estimate 1987 1988 Real NWPGrowthDuring 1989 Past 3HardMarkets Current $ Current 1990 2001-03F: 8.8% 1985-87: 14.5% 1991 1975-78: 8.6% 1992 1993 1994 on first half result.