Although experts say the industry should see a leveling out of combined ratio increases by mid to late 2009, the sting of what occurred in 2008 is being felt industry-wide. The 10-point increase in the property/casualty industry’s combined ratio for 2008 seems yet another indicator of the trickle-down effect of the current economic downslide.

According to an A.M. Best Co. statistical study, the total industry registered a 104.7 combined ratio in 2008, compared with 95.1 in 2007. The combined ratio for the top 25 writers based on net premiums written rose to 102.3 in 2008 from a profitable 94.5 the prior year.

A.M.Best P&C financial analyst Ed Keane, points to catastrophes, losses from mortgage/financial guaranties and a general deterioration in rates. "Cat losses added 5.1 points to the overall combined ratio in 2008," Keane said. "In 2007, cat losses added about 1.5 points."

Overall insured property losses in 2008 were the fourth-highest within the last decade—approximately $25.2 billion, according to ISO's Property Claim Services Unit. A majority of the cat losses were caused by tropical storms and hurricanes—Ike, Gustav, Dolly, Fay, Hanna and Eduoard. Tornadoes and winter storms in the Midwest also added to cat losses in the industry.

The Texas insurance industry seemed particularly hard hit, with losses totaling nearly $1.4 billion in 2008. The state was battered by three hurricanes as well as several other major weather events. According to figures released by the Texas Department of Insurance, for every dollar the state's insurance industry took in it paid out $1.65. State officials estimate damages from last year's hurricane season to be more than $29 billion. Ike and Dolly resulted in nearly 1 million insurance claims alone, said Mark Hanna, a spokesman for the Insurance Council of Texas.

“It was a tough year for the industry after several profitable years," Ben Gonzalez, a spokesman for the Texas Department of Insurance, said in a statement on "These things balance out. There are good years and bad years."

As for the mortgage and financial markets, Keane said losses added more than three points to the combined ratio, compared with less than a point in 2007. Investment losses dropped policyholder surplus about 11.3% last year, according to the study. The industry reported an unrealized investment loss of $55 billion, Keane said.

According to A.M. Best, the highest ratios belonged to American Family Insurance Group, with 113.3; State Farm Group, with 112.9; and CNA Insurance Cos., with 112.4. After recording cat and storm losses of more than $1 billion for the second time in three years, American Family posted a $297.9 million net loss in 2008. State Farm reported a $542 million net loss in 2008 on declines in the value of investments and catastrophe losses. CNA Financial reported a $299 million net loss for the year.

"Rates could begin to level out by mid to late 2009," said Keane, "but the results of that will not come through until 2010."

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