Catastrophe-related Losses Batter Balance Sheets

New numbers from A.M. Best Co. have quantified the financial impact of the disaster-related losses sustained by U.S. insurers during the first half of 2011.

According the company, catastrophe-related losses for the industry climbed to an estimated $27.0 billion for the first half of 2011, more than doubling the total reported for the first six months last year, and already surpassing the year-end 2010 total. The losses enervated the industry’s net income, which fell 67 percent to $6.9 billion. The industry’s combined ratio also deteriorated more than 9 points, rising to nearly 110 through the first half of 2011.

Moreover, A.M. Best notes catastrophe-related losses are not the only economic factor plaguing the industry. In the commercial lines segment, market conditions remain challenging as a sluggish economic recovery saps business demand and volatility in the investment markets engender relatively low investment yields. Indeed, overall profitability measures remained relatively low, with the industry after-tax return on equity measured at 1.2 percent, down from 4 percent for the same period of 2010.

One bright spot in the data was policyholders’ surplus, which increased $1.9 billion, or 0.3 percent, to $556.2 billion, from $554.3 billion posted at year-end 2011. 

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