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Insurers Will Prevail in Wind vs. Water Suits

NEW YORK, Jan. 10, 2006 -- Leaders of the property/casualty insurance industry expect to succeed in the wind versus water lawsuits in Mississippi, according to a survey conducted by the Insurance Information Institute (I.I.I.) at its tenth annual Property/Casualty Insurance Joint Industry Forum, held here.

Eighty percent of executives in the property/casualty industry are confident that the industry will win the battle against Mississippi lawsuits on the flood issue.

“Homeowners insurance does not cover flooding, including, but not limited to flooding as a result of high tides or storm surges,” said Robert Hartwig, senior vice president and chief economist of the I.I.I. “The policy language is crystal clear and unambiguous,” he contended.

Insurance leaders believe the industry’s financial performance will improve in the year ahead. Seventy-nine percent of survey respondents expect 2006 to be more profitable than last year, as measured by the combined ratio, a percentage of each premium dollar a property/casualty insurer spends on claims and expenses. The combined ratio for 2005 is estimated at 99.

“All indications are that 2006 will be a good year for the property/casualty industry assuming ‘normal’ catastrophe losses,” said Hartwig. “However, threats abound, including the likelihood of another severe hurricane season and protracted litigation.”

Broken down by lines of insurance, fifty-six percent of respondents predict the homeowners line to be more profitable than last year. Fifty-three percent of insurers expect interest rates to rise, 40 percent expect rates to remain flat and eight percent expect interest rates to fall.

Insurers continued to remain pessimistic this year when it came to workers compensation and commercial lines. Seventy-four percent of respondents thought there would be no improvement in the workers compensation market and fifty-four percent did not expect an improvement in the commercial lines.

In addition, fifty-four percent of respondents do not expect auto insurance to be more profitable in 2006.

On the investment side, 90 percent of industry leaders are looking for another up year in the equity markets. “This will bode well for industry investment returns,” said Hartwig.

Fifty-four percent of respondents do not expect consolidation among insurers and reinsurers. In addition, 68 percent of insurers believe that reinsurance recoverables will be a problem for insurers in 2006.

Seventy-two percent of insurers expect another bad year for catastrophes in 2006 though seventy-six percent predict that record losses in 2005 will not provoke a hard market.

Asked whether Congress will adapt a National Catastrophe Insurance Plan in 2006, 98 percent of respondents felt Congress would not adapt a plan. In addition, Eight-two percent of respondents do not think the insurance industry is doing enough to promote disaster mitigation.

Looking at investigations into certain industry practices by state attorneys general, fifty-one percent of insurers felt that most of these investigations were wrapped up.

The Property/Casualty Insurance Joint Industry Forum was created to provide leaders from the widest spectrum of the industry with an opportunity to meet with each other in discussion of topics of general interest.

Forum participants included nearly 250 representatives from property and casualty insurance and reinsurance companies and organizations. Of these, roughly 40 percent responded to the survey.

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