The nation’s property/casualty insurers collected record profits in 2006, a year after suffering record hurricane losses, industry groups reported Wednesday.
The industry’s net income rose to $63.7 billion in 2006 from $44.2 billion in 2005, according to the ISO, a risk information service headquartered in Jersey City, N.J., and the Property Casualty Insurers Association of America, an industry trade group based in Des Plaines, Ill.
They said most of the improvement was because fewer catastrophic storms occurred last year than in 2005.
The ISO’s Property Claim Services unit earlier reported that insured losses from catastrophes dropped to $9.2 billion last year from $61.9 billion in 2005, when hurricanes Katrina, Rita and Wilma caused widespread destruction along the Gulf Coast and in Florida.
The profits last year also were boosted by stronger underwriting gains, which are premiums minus losses and administrative expenses, the report said.
“Insurers and residents of coastal states dodged a bullet last year,” said Michael R. Murray, ISO assistant vice president for financial analysis. “Though the experts were predicting a highly active hurricane season, no hurricanes struck the U.S., giving insurers and the areas hit by the six catastrophic hurricanes that struck in 2005 much-needed time to recover.”
Genio Staranczak, chief economist of the PCIAA, said that insurers needed to worry about future storms.
“The threat of more frequent and severe storms, combined with the growing population and the increased value of property in the highest risk areas of the country, means that the threat of enormous losses from natural disasters is a financial problem the nation must deal with,” Staranczak said.
Experts at Colorado State University predict that the 2007 Atlantic hurricane season should be “very active,” with nine hurricanes and a good chance that at least one major hurricane will hit the U.S. coast.
ISO and the trade association note that a hurricane causing $100 billion or more in insured losses was “a very real possibility.” It said that if a storm with the strength of 1992’s Hurricane Andrew hit downtown Miami today, it could cause that much damage.
The report said that net written premiums rose to $443.8 billion in 2006 from $425.5 billion in 2005.
The industry’s statutory net worth, or surplus, increased 14.4 percent to $487.1 billion at the end of 2006 from $425.8 billion at the end of 2005.