Congress likely will delay implementation of the Biggert-Waters reforms to the National Flood Insurance Program, according to a survey of P&C industry leaders by the Insurance Information Institute.
According to Insurance Information Institute (I.I.I.), three-quarters of those surveyed at its P&C Insurance Joint Industry Forum this week said Congress would likely delay the implementation of reforms, which will help reduce NFIP’s debt by realigning rates risk and losses in flood-prone areas. NFIP’s debt is estimated at more than $25 billion. Most insurers expect Congress will delay the implementation of Biggert-Waters, I.I.I. said.
A vast majority, 93 percent, said they expect Congress to reauthorize the Terrorism Risk Insurance Act, which is set to expire Dec. 31, 2014. Insurers expect a stricter regulatory environment in the year ahead, and 70 percent said they believe the federal government could expand regulatory oversight of insurers further.
By line of business, 35 percent said there will be an improvement in personal auto; 45 said there will be an improvement in homeowners’ lines; 40 percent expect an improvement in commercial lines; and 50 percent expect an improvement in workers’ compensation.
"Many economic forecasts say that the U.S. and most global economies will grow stronger in 2014, and this means a greater need to protect more assets and income, which leads to greater insurance premium volume," said Dr. Steven Weisbart, SVP and chief economist for I.I.I. "Both personal lines, auto and homeowners’ insurance, and commercial insurance will see increased exposures. 2013 was the industry's most profitable year since the Great Recession and 2014 could be even better, barring major catastrophe losses."
Highlights from the survey:
- Of those surveyed, 40 percent said economic growth in the United States will accelerate in 2014; 58 percent said it will remain the same.
- Premium growth will be higher this year, according to 30 percent of respondents; 42 percent said it will remain flat; and 28 percent said it will be lower.
- Capacity as measured by policyholders’ surplus is expected by 73 percent of respondents to increase; 20 percent said it will remain flat; and 7 percent said it will decrease.
- 68 percent said the 2014 combined ratio will be higher than 2013’s. The combined ratio improved 5.8 percentage points to 96.6 percent in nine-months 2013 from 100.9 percent in nine-months 2012.
- 75 percent of respondents expect consolidation among reinsurers to increase in an effort to lower expenses. “Combined ratios must be lower in today’s depressed investment environment to generate risk appropriate ROEs,” Weisbart said. “Lower catastrophes helped pull up ROEs in 2013.”
- 80 percent said tort trends will be the same as last year; 15 percent said it will deteriorate; 5 percent said it will improve.
- 83 percent said they expect equity markets to continue higher; for the insurance industry as a whole, equities constitute 15 to 20 percent of invested assets.
- 80 percent said they expect interest rates will rise; 20 percent said they expect interest rates will remain flat; for the industry as a whole, 70 percent of invested assets are in bonds.
I.I.I. said nearly 250 representatives from property/casualty insurance and reinsurance companies and organizations attended its 18th annual P&C Insurance Joint Industry Forum and 40 percent participated in the survey.
Related content: House Subcommittee Discusses Potential Delays to NFIP Reform
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