A Firm Foundation The Insurance Industry & Its Contributions to Society Robert P. Hartwig, Ph.D.,...
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Transcript of A Firm Foundation The Insurance Industry & Its Contributions to Society Robert P. Hartwig, Ph.D.,...
A Firm Foundation The Insurance Industry &Its Contributions to Society
Robert P. Hartwig, Ph.D., CPCU, PresidentInsurance Information Institute 110 William Street New York, NY 10038
Tel: (212) 346-5520 Fax: (212) 732-1916 [email protected] www.iii.org
St. John’s UniversitySchool of Risk Management, Insurance &
Actuarial Science
New York, NYApril 10, 2008
Key Roles Insurers Play in Society
• Insurers as Claims Payers
• Philanthropists
• Contributors to the Economy
• Employers
• Taxpayers
• Investors
• Educators
• Promoters of Public Safety
• Builders in Times of Greatest Need: Catastrophes
INSURERS AS CLAIMS PAYERS
Trillions and Trillions Paid(& Counting)
Incurred Losses, Property/Casualty Insurance 2000-2007*
$218.7
$273.1 $266.9 $267.7 $277.6
$316.9
$283.8$298.6
$0
$50
$100
$150
$200
$250
$300
$350
00 01 02 03 04 05 06 07
*Losses occurring within a fixed period whether or not adjusted or paid during the same period, on a direct basis before reinsurance.Sources: NAIC Annual Statement Database, via Highline Data, LLC, ISO. Insurance Info. Institute; http://www.iii.org/economics/toc/
$ billions
P/C insurers paid out $275 billion each year on average to millions of people and businesses since 2000.
Cumulative Incurred Losses, P/C Insurance 2000-2007*
$218.7
$491.8
$758.7
$1,026.4
$1,304.0
$1,620.9
$1,904.8
$2,203.4
$0
$500
$1,000
$1,500
$2,000
$2,500
00 01 02 03 04 05 06 07*Losses occurring within a fixed period whether or not adjusted or paid during the same period, on a direct basis before reinsurance.Sources: NAIC Annual Statement Database, via Highline Data, LLC, ISO. Insurance Info. Institute; http://www.iii.org/economics/toc/
$ BillionsP/C insurers paid more that $2.2
trillion in claims to tens of millions
of people and businesses since
2000
Life Insurance Claims & Benefits Paid, 2000-2006*
$319.4
$282.8 $288.7$301.5
$331.2
$370.1
$426.9
$200
$250
$300
$350
$400
$450
$500
00 01 02 03 04 05 06
*On a direct basis before reinsurance.Sources: NAIC Annual Statement Database, via Highline Data, LLC; Insurance Info. Institute.
$ Billions
Life insurers paid more than $2.3 trillion in claims and benefits
between 2000 and 2006
Share of Losses Paid by Reinsurers, by Disaster*
30%25%
60%
20%
45%
0%
10%
20%
30%
40%
50%
60%
70%
Hurricane Hugo(1989)
Hurricane Andrew(1992)
Sept. 11 TerrorAttack (2001)
2004 HurricaneLosses
2005 HurricaneLosses
*Excludes losses paid by the Florida Hurricane Catastrophe Fund, a FL-only windstorm reinsurer, which was established in 1994 after Hurricane Andrew. FHCF payments to insurers are estimated at $3.85 billion for 2004 and $4.5 billion for 2005.Sources: Wharton Risk Center, Disaster Insurance Project; Insurance Information Institute.
Reinsurance is playing an increasingly
important role in the financing of mega-CATs; Reins. Costs
are skyrocketing
INSURERS AS PHILANTHROPISTS
Insurers are Generous withTheir Money and Time
Insurance Industry Charitable Contributions to U.S. Beneficiaries, 2006
$921.6
$147.1$67.8
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
Banks Insurance Finance
Sources: The Conference Board; Insurance Info. Institute; http://www.iii.org/economics/toc/
$ Millions
In 2006, the insurance industry’s donations to U.S. beneficiaries totaled $147.1
million, placing it among the top 15 contributors among
large U.S. corporations.
Top 10 Total Contributions Per Worldwide Employee By Industry, 2005*
$339
$367
$547
$560
$629
$713
$784
$818
$1,549
$5,585
$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000
Computers & Technology
Food, beverage & tobacco
Other manufacturing**
Insurance
Utilities
Banks
Finance
Petroleum, gas & mining
Printing, publishing & media
Pharmaceuticals
*Companies not reporting worldwide employee figures are excluded. **Includes other diversified manufacturing.Sources: The Conference Board; Insurance Info. Institute; http://www.iii.org/economics/toc/
Charitable contributions per employee totaled $560 in 2005,
7th highest of any industry
INSURERS AS CONTRIBUTORS TO
THE ECONOMY
Insurers are an Important Segment of the Economy
$234.4 $237.4
$255.0
$295.6 $296.1
2.3% 2.3% 2.3%2.5% 2.4%
$200
$220
$240
$260
$280
$300
$320
01 02 03 04 05
0%
1%
2%
3%
% o
f T
ota
l G
DP
Insurer GDP% of Total GDP
Insurance Sector’s Share of Gross Domestic Product (GDP), 2001-2005
The insurance industry accounted for nearly $300 billion or 2.4% of
US GDP in 2005
Source: Insurance Information Institute: http://www.iii.org/economics/toc/
Insu
ran
ce
GD
P
INSURERS AS EMPLOYERS
Good Jobs, Good Pay
Insurance Carriers Employment and Payroll, 2000-2007
2,220.6 2,233.2 2,266.0 2,308.12,258.6
2,259.3 2,303.72,233.7
$128.9$137.0
$143.6$154.0
$166.5$173.2
$183.4
1,500
2,000
2,500
3,000
00 01 02 03 04 05 06 07
No. of
Em
plo
yee
s (0
00)
$0
$50
$100
$150
$200
An
nu
al
Payro
ll (
$ b
illi
on
s)
No. of Employees Annual Payroll
Source: U.S. Dept. of Labor, Bureau of Labor Statistics; U.S. Dept. of Commerce, Bureau of Economic Analysis; Insurance Information Institute.
Insurers employed more than 2.3 million people in 2007, with total wages approaching $200 billion.
INSURERS AS TAXPAYERS
Insurers are a Major Source of Government Revenue
Insurance Industry Taxes Paid and Incurred, 2002-2006*
$20.0 $19.6
$22.4 $22.2
$28.5
$12.6$11.0 $11.1 $11.3
$15.2
$0
$5
$10
$15
$20
$25
$30
02 03 04 05 06
Property/Casualty Life
*Based on page 3, Annual Statement, Liabilities, Surplus and Other Funds.Sources: Insurance Info. Institute; http://www.iii.org/economics/toc/
P/C and Life insurers paid $174 billion in taxes between
2002 and 2006
INSURERS AS INVESTORS
Insurers are a Among theLargest Investors in the World
Insurance IndustryTotal Financial Assets, 2002-2006
$939.8 $1,059.7 $1,160.9 $1,250.4 $1,365.4
$3,335.0$3,772.8
$4,130.3$4,350.7
$4,708.8
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$5,000
02 03 04 05 06
Property/Casualty Life
Sources: Board of Governors of the Federal Reserve System; Insurance Info. Institute; http://www.iii.org/economics/toc/
$ billions
Insurers are among the largest investors in the world,
facilitating global growth in the private and public sectors
Selected Insurance IndustryFinancial Assets, 2006
$278.6 $232.5$335.2
$197.3
$1,881.8
$1,405.2
$33.2
$470.5
$0
$250
$500
$750
$1,000
$1,250
$1,500
$1,750
$2,000
Corporate andforeign bonds
Corporatestocks
Municipalsecurities
U.S.governmentsecurities
Property/Casualty Life
Sources: Board of Governors of the Federal Reserve System; Insurance Info. Institute; http://www.iii.org/economics/toc/
$ billions
As the world’s largest muni bond investor, insurers fund hundreds of billions of dollars in state and
local projects such as schools, roads and health care
INSURERS AS EDUCATORS
Educated Consumers Makethe Best Customers
Free Home Inventory Software
400,000+ downloads
and counting!
Helping businesses learn their insurance
needs
Spanish language
information
Information & Research
INSURERS AS PROMOTERS OF PUBLIC SAFETY
Investments in Public Safety& Security
INSURERS AS BUILDERS IN
TIMES OF GREATEST NEED
Catastrophic Losses: Insurers Most Critical Job
Most of US Population & Property Has Major CAT Exposure
Is Anyplace
Safe?
U.S. Insured Catastrophe Losses*$7
.5
$2.7
$4.7
$22.
9
$5.5 $1
6.9
$8.3
$7.4
$2.6 $1
0.1
$8.3
$4.6
$26.
5
$5.9 $1
2.9 $2
7.5
$6.7
$100
.0
$61.
9
$9.2
$0
$20
$40
$60
$80
$100
$120
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
20??
*Excludes $4B-$6b offshore energy losses from Hurricanes Katrina & Rita. Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01. Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B.Source: Property Claims Service/ISO; Insurance Information Institute
$ Billions
2006/07 were welcome respites. 2005 was by far the worst year ever for insured catastrophe losses in the US, but the worst has yet to come.
$100 Billion CAT year is coming soon
Catastrophe Claims and Lossesin the U.S., 2000-2007*
$4.6 $5.9
$12.9
$6.5
$27.5
$61.9
$9.2
$26.51.4
1.8
2.6
3.4
2.3
1.21.6
4.0
$0
$10
$20
$30
$40
$50
$60
$70
00 01 02 03 04 05 06 07
Los
ses
($ m
illi
ons)
0
1
1
2
2
3
3
4
4
5
Cla
ims
(000
)
Losses ($ millions) Claims (000)
Source: ISO’s Property Claim Services Unit; Insurance Information Institute; http://www.iii.org/economics/toc/
Insurers paid $155 billion in catastrophe losses on
18.3 million claims arising from 192 events between 2000 and 2007
States With Largest Insured Catastrophe Losses in 2007
$ Millions
$1,230
$747$677
$320$223 $202 $200 $200
$262$270$272
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
CA MN TX GA IL OK KS MO NY CO ALSource: PCS/ISO; Insurance Information Institute.
2007 CAT STATS
•1.18 million CAT claims across 41 states arising
•23 catastrophic events
Distribution of 2007 US CAT Losses, by Type and Insured Loss
Personal, $4.4 , 68%
Commercial, $1.3 , 20%
Vehicle, $0.8 , 12%Personal (home, condo, rental, contents etc.)
accounted for 68% of all US insured
CAT losses paid in 2007. CAT claim
count was 1.18 million.
Source: PCS division of ISO.
$ Billions
$14.3
$34.4
$40.2
$47.7
$63.6
$68.4
$108.3
$132.6
$138.4
$154.4
$168.7
$420.7
$502.5
$538.4
$2,260.0
$2,294.4
$2,589.3
$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000
Sep. 12-18, 1979 Hollywood Hills, CA
Oct. 9-10, 1982 Los Angeles, Ventura, Orange Cos., CA
Nov. 16-17, 1980 Bradbury, Pacific Palisades, Malibu, Sunland,Carbon Canyon, Lake Elsinore, CA
Oct. 23-25, 1978 Los Angeles, Ventura Cos., CA
May 17-20, 1985 Florida
Jul. 26-27, 1977 Santa Barbara, Montecito, CA
Nov. 24-30, 1980 Los Angeles, San Bernardino, Orange,Riverside, San Diego Cos., CA
Sep. 22-30, 1970 Oakland-Berkeley Hills, CA
Jun. 23-28, 2002 Rodeo-Chediski Complex, AZ
July 2007: Lake Tahoe, CA**
May 10-16, 2000 Cerro Grande, NM
Jun. 27-Jul. 2, 1990 Santa Barbara County, CA
Oct. 27-28, 1993 Orange Co., CA
Nov. 2-3, 1993 Los Angeles Co., CA
Oct. 2007: Southern CA Fires*
Oct. 2003: Southern CA Fires
Oct. 20-21, 1991: Oakland, Alameda Cos., CA
Insured Losses (Millions 2007 $)
Top Catastrophic Wildland Fires In The United States, 1970-2007
Fourteen of the top 17
catastrophic wildfires since
1970 occurred in California
*Estimate from CA Insurance Dept., Jan. 10, 2008. Source: ISO's Property Claim Services Unit; California Department of Insurance; Insurance Information Institute.
Inflation-Adjusted U.S. Insured Catastrophe Losses By Cause of Loss,
1987-2006¹
Fire, $6.6 , 2.2%
Tornadoes, $77.3 , 26.0%
All Tropical Cyclones, $137.7 ,
46.3%
Civil Disorders, $1.1 , 0.4%
Utility Disruption, $0.2 , 0.1%
Water Damage, $0.4 , 0.1%Wind/Hail/Flood,
$9.3 , 3.1%
Earthquakes, $19.1 , 6.4%
Winter Storms, $23.1 , 7.8%
Terrorism, $22.3 , 7.5%
Source: Insurance Services Office (ISO)..
1 Catastrophes are all events causing direct insured losses to property of $25 million or more in 2006 dollars. Catastrophe threshold changed from $5 million to $25 million beginning in 1997. Adjusted for inflation by the III.2 Excludes snow. 3 Includes hurricanes and tropical storms. 4 Includes other geologic events such as volcanic eruptions and other earth movement. 5 Does not include flood damage covered by the federally administered National Flood Insurance Program. 6 Includes wildland fires.
Insured disaster losses totaled $297.3 billion from
1987-2006 (in 2006 dollars). Wildfires accounted for
approximately $6.6 billion of these—2.2% of the total.
Catastrophic Hurricane Claims and Losses in the U.S., 1998-2005*
$3,315$430 $1,775
$22,900
$58,337
$2,315
730 696
134
528
2,259
3,316
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
98 99 02 03 04 05
Los
ses
($ m
illi
ons)
0
500
1000
1500
2000
2500
3000
3500
Cla
ims
(000
)
Losses ($ millions) Claims (000)
Source: ISO’s Property Claim Services Unit; Insurance Information Institute; http://www.iii.org/economics/toc/
Insurers paid $89.1 billion in hurricane losses on 7.7 million claims between 1998 and 2005
Global Insured Catastrophe Losses by Region, 2001-2007
0
10
20
30
40
50
60
70
80
90
2001 2002 2003 2004 2005 2006 2007
Seas/SpaceAfricaOceania/AustraliaSouth AmericaAsiaEuropeNorth America*
Notes: 2001-03 figures for N. America include US only. 2001 figure includes only property losses from 9/11. Source: Insurance Information Institute compiled from Swiss Re sigma issues.
North America accounted for 70% of global
catastrophe losses 2001-2007
$ Billions
HURRICANE KATRINA
Rebuilding Communities & Lives
Top 10 Most Costly Hurricanes in US History, (Insured Losses, $2005)
$3.5 $3.8 $4.8 $5.0$6.6 $7.4 $7.7
$10.3
$21.6
$41.1
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
Georges(1998)
Jeanne(2004)
Frances(2004)
Rita (2005)
Hugo(1989)
Ivan (2004)
Charley(2004)
Wilma(2005)
Andrew(1992)
Katrina(2005)
$ B
illi
ons
Sources: ISO/PCS; Insurance Information Institute.
Seven of the 10 most expensive hurricanes in US history
occurred in the 14 months from Aug. 2004 – Oct. 2005:
Katrina, Rita, Wilma, Charley, Ivan, Frances & Jeanne
Insured Loss & Claim Count for Major Storms of 2005*
$1.1
$41.1
$10.3$5.0
104
383
1,047
1,744
$0$5
$10$15$20
$25$30$35
$40$45
Dennis Rita Wilma Katrina
Size of Industry Loss ($ Billions)
Insu
red
Lo
ss ($ B
illio
ns)
02004006008001,0001,2001,4001,6001,8002,000
Cla
ims (th
ou
san
ds)
Insured Loss Claims
*Property and business interruption losses only. Excludes offshore energy & marine losses.
Source: ISO/PCS as of June 8, 2006; Insurance Information Institute.
Hurricanes Katrina, Rita, Wilma & Dennis produced a record 3.3
million claims
Hurricane Katrina Claim Status on Storm’s 1st Anniversary*
In Process, 3%
Mediation/ Litigation, 2%
Settled, 95%
95% of the 1.2 million
homeowners insurance claims in Louisiana & Mississippi are
settled, with just 2% in dispute
*Hurricane Katrina made its north Gulf coast landfall August 29, 2005.Source: Insurance Information Institute survey, August 2006.
Hurricane Katrina Claim Status on Storm’s 2nd Anniversary*
Unsettled**, 1%
Settled, 99%
99% of the 1.2 million homeowners insurance claims in
Louisiana & Mississippi were settled as of the storm’s second
anniversary in 2007
*Hurricane Katrina made its north Gulf coast landfall August 29, 2005.**Unsettled implies that the claim is in the process of settlement, involved in mediation or litigated.Source: Insurance Information Institute survey, August 2007.
Hurricane Katrina Insured Loss Distribution by State ($ Millions)*
Mississippi, $13,605 , 33.5%
Louisiana, $25,275 , 62.3%
Tennessee, $59.0 , 0.1%Florida, $572.0 , 1.4%
Georgia, $36.0 , 0.1%Alabama, $1,032 ,
2.5%
*As of June 8, 2006Source: PCS division of ISO.
Mississippi accounted for 33.5% of the insured losses
paid and 29.5% of the claims filed
Total Insured Losses =
$40.579 Billion
$2,879 $2,917 $2,889 $2,894$3,159 $3,046 $3,121
$3,702
$4,281
16.8%
1.3%0.2%
9.2%
-3.6%
2.5%
18.6%
15.6%
-1.0%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
98 99 00 01 02 03 04 05 06
Val
ue
of
Co
nst
ruct
ion
GD
P
-5%
0%
5%
10%
15%
20%
Gro
wth
in
Co
nst
ruct
ion
GD
P
Value of Construction GDP
% Growth in Construction GDP
Growth in Mississippi Construction Component of GDP Pre/Post-Katrina
Insurance dollars helped construction
spending surge in MS
Sources: US Bureau of Economic Analysis; Insurance Information Inst.
Insured Offshore Energy Losses for Recent Major Gulf Storms
$2.0$2.25
$3.0
$0.0
$1.0
$2.0
$3.0
$4.0
Katrina (2005) Ivan (2004)* Rita (2005)
$ B
illi
ons
Hurricanes Katrina, Rita and Ivan cost energy
insurers at least $7 billion
Sources: Insurance Information Institute research estimates. *Midpoint of estimated range for $2.0 to $2.5 billion)
Insurance Information Institute On-Line
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