For those readers of this blog who may not be familiar with insurance business, and how pricing for the product hardens or softens, the following news illustrates why many of us are telling Clients to expect increases to their insurance program in 2009:
From BI Europe.com:
Reinsurers report higher combined ratio
By Judy Greenwald
Dec. 01, 2008
Twenty U.S. reinsurers surveyed by the Reinsurance Assn. of America reported a 104.2% combined ratio for the nine months ended Sept. 30, compared with 94.1% reported by a comparable group for the same period a year ago.
The 2008 combined ratio reflects a 75% loss ratio and a 29.2% expense ratio, according to the Washington-based RAA.
The reinsurers wrote $19.01 billion of net premiums written for the nine months, a 6% increase from the total reported by the comparable group. The 2008 policyholder surplus was $72.07 billion.
Oftentimes, our Clients engage us in the discussions as to 'Why are my premiums going up when I haven't had any losses?' These are never easy discussions because frankly, our individual Clients are just one component of a very large network of financial transactions, not the least of which is the reinsurance market. For the novice, the easiest way for me to explain is that the costs of insuring you are increasing, and these costs are being passed along. This is not different from many of the other products you buy. When the cost to manufacture and deliver your product rise, you must pass along the cost to your buyer. The unique component of insurance is that the cost to produce insurance coverage today may not be realized until several years from now.
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