P&C Industry Doesn’t Need Systemic Regulator

P&C Industry Doesn’t Need Systemic Regulator


By DAVID A. SAMPSON
Published 7/6/2009

Excerpts:

The Obama administration’s initial comprehensive white paper on financial services regulatory reform explicitly acknowledged that traditional property and casualty insurers did not cause the current fiscal crisis.

In the midst of the current meltdown, the p&c industry has performed well, which underscores that overall it is not systemically risky.

An analysis of the recent and historical impairment activity over the last 30 years for major sectors of the financial services industry demonstrates clearly that the p&c industry has a consistent and low historic impairment rate that is uncorrelated with larger economic downturns.


Other financial sectors have shown tremendous variance, with spikes in impairments going hand-in-hand with recessions.


The life and health insurance business registered nearly 4 percent in impairments during the 1990-91 recession, while banks approached 10 percent in 2008.

But the most marked spikes, historically, have been among thrifts, which hit 4 percent by the end of the 1980-82 recession, shot past 12 percent in 1991, and zoomed off the chart in 2008 to 31.2 percent.

Conversely, the percentage of industry impairments since 1980 in the p&c insurance sector has never risen above 1.5 percent, and has been consistently close to zero since 2004—even during the current down cycle.

Read full article: http://www.property-casualty.com/Issues/2009/July%206%202009/Pages/PC-Industry-Doesnt-Need-Systemic-Regulator.aspx
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This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.