It’s no mean feat connecting the fortunes of the insurance industry with the economy at large. Yet, Robert Hartwig, president of the Insurance Information Institute and an insurance industry economist, gives it a go.

In a Web seminar, Hartwig surveyed the health of the insurance industry through the prism of macroeconomic events including the recently passed American Recovery and Reinvestment Act. Yet easy linkages are hard to come by, as Hartwig noted that the economy had been in recession for 14 months while insurers had been subject to a soft market for four years.

“The industry’s overall financial performance over long periods of time is more a function of the underwriting cycle than the external economic environment,” he said. “This doesn’t mean we’re immune to it, but the overwhelming force that determines profitability is where are in the underwriting cycle.” 

Indeed, Hartwig said in the long view 2008 was an anomaly, as claims losses due to natural disaster were paired with the loss of value in a variety of financial assets held by insurers.

As for the stimulus law, Hartwig said that although it doesn’t directly benefit the insurance industry, it would have some indirect effects, especially for commercial lines.

“The stimulus package is unlikely to increase net written premiums by more than 1%,” he said, adding that the way the package is being rolled out may well defer the full effects of it until the end of 2010.

Yet, even a 1% bump in net written premiums would amount to $4.5 billion, Hartwig noted. With the focus of act’s infrastructure spending going toward the building trades, providers of commercial insurance coverage will see a measurable bump in demand.

“Because the primary objective of the act is to stimulate employment, workers' compensation will be principle line that benefits from the package,” he said.

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