A Firm Foundation The Insurance Industry & Its Contributions to Society

Transcription

1 A Firm Foundation The Insurance Industry & Its Contributions to Society St. John s University School of Risk Management, Insurance & Actuarial Science New York, NY April 10, 2008 Robert P. Hartwig, Ph.D., CPCU, President Insurance Information Institute 110 William Street New York, NY Tel: (212) Fax: (212) bobh@iii.org

2 Key Roles Insurers Play in Society Insurers as Claims Payers Philanthropists Contributors to the Economy Employers Taxpayers Investors Educators Promoters of Public Safety Builders in Times of Greatest Need: Catastrophes

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4 INSURERS AS CLAIMS PAYERS Trillions and Trillions Paid (& Counting)

5 Incurred Losses, Property/Casualty Insurance * $350 $300 $ billions $273.1 $266.9 $267.7 $277.6 $316.9 $283.8 $298.6 $250 $200 $218.7 $150 $100 $50 $0 P/C insurers paid out $275 billion each year on average to millions of people and businesses since *Losses occurring within a fixed period whether or not adjusted or paid during the same period, on a direct basis before reinsurance. Sources: NAIC Annual Statement Database, via Highline Data, LLC, ISO. Insurance Info. Institute;

6 Cumulative Incurred Losses, P/C Insurance * $2,500 $2,000 $1,500 P/C insurers paid more that $2.2 trillion in claims to tens of millions of people and businesses since 2000 $ Billions $2,203.4 $1,904.8 $1,620.9 $1,304.0 $1,000 $758.7 $1,026.4 $500 $218.7 $491.8 $ *Losses occurring within a fixed period whether or not adjusted or paid during the same period, on a direct basis before reinsurance. Sources: NAIC Annual Statement Database, via Highline Data, LLC, ISO. Insurance Info. Institute;

7 Life Insurance Claims & Benefits Paid, * $ Billions $500 $450 $400 Life insurers paid more than $2.3 trillion in claims and benefits between 2000 and 2006 $370.1 $426.9 $350 $300 $319.4 $282.8 $288.7 $301.5 $331.2 $250 $ *On a direct basis before reinsurance. Sources: NAIC Annual Statement Database, via Highline Data, LLC; Insurance Info. Institute.

8 Share of Losses Paid by Reinsurers, by Disaster* 70% 60% 50% 40% 30% 20% Reinsurance is playing an increasingly important role in the financing of mega- CATs; Reins. Costs are skyrocketing 30% 25% 60% 20% 45% 10% 0% Hurricane Hugo (1989) Hurricane Andrew (1992) Sept. 11 Terror Attack (2001) 2004 Hurricane Losses 2005 Hurricane Losses *Excludes losses paid by the Florida Hurricane Catastrophe Fund, a FL-only windstorm reinsurer, which was established in 1994 after Hurricane Andrew. FHCF payments to insurers are estimated at $3.85 billion for 2004 and $4.5 billion for Sources: Wharton Risk Center, Disaster Insurance Project; Insurance Information Institute.

9 INSURERS AS PHILANTHROPISTS Insurers are Generous with Their Money and Time

10 Insurance Industry Charitable Contributions to U.S. Beneficiaries, 2006 $ Millions $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 $921.6 In 2006, the insurance industry s donations to U.S. beneficiaries totaled $147.1 million, placing it among the top 15 contributors among large U.S. corporations. $147.1 $67.8 Banks Insurance Finance Sources: The Conference Board; Insurance Info. Institute;

11 Top 10 Total Contributions Per Worldwide Employee By Industry, 2005* Pharmaceuticals $5,585 Printing, publishing & media $1,549 Petroleum, gas & mining Finance Banks Utilities Insurance Other manufacturing** Food, beverage & tobacco Computers & Technology $818 $784 $713 $629 $560 $547 $367 $339 Charitable contributions per employee totaled $560 in 2005, 7 th highest of any industry $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 *Companies not reporting worldwide employee figures are excluded. **Includes other diversified manufacturing. Sources: The Conference Board; Insurance Info. Institute;

12 INSURERS AS CONTRIBUTORS TO THE ECONOMY Insurers are an Important Segment of the Economy

13 Insurance Sector s Share of Gross Domestic Product (GDP), Insurance GDP $320 $300 $280 $260 $ % 2.3% 2.3% $234.4 Insurer GDP % of Total GDP $237.4 $255.0 $295.6 $ % 2.4% 3% 2% 1% % of Total GDP $220 The insurance industry accounted for nearly $300 billion or 2.4% of US GDP in 2005 $200 0% Source: Insurance Information Institute:

14 INSURERS AS EMPLOYERS Good Jobs, Good Pay

15 Insurance Carriers Employment and Payroll, Source: U.S. Dept. of Labor, Bureau of Labor Statistics; U.S. Dept. of Commerce, Bureau of Economic Analysis; Insurance Information Institute. No. of Employees (000 3,000 2,500 2,000 Insurers employed more than 2.3 million people in 2007, with total wages approaching $200 billion. $128.9 $137.0 $143.6 $154.0 $166.5 $173.2 $ , , , , , , , ,233.7 $200 $150 $100 $50 Annual Payroll ($ billions 1, No. of Employees Annual Payroll $0

16 INSURERS AS TAXPAYERS Insurers are a Major Source of Government Revenue

17 Insurance Industry Taxes Paid and Incurred, * $30 P/C and Life insurers paid $174 billion in taxes between 2002 and 2006 Property/Casualty $28.5 Life $25 $20 $20.0 $19.6 $22.4 $22.2 $15 $10 $12.6 $11.0 $11.1 $11.3 $15.2 $5 $ *Based on page 3, Annual Statement, Liabilities, Surplus and Other Funds. Sources: Insurance Info. Institute;

18 INSURERS AS INVESTORS Insurers are a Among the Largest Investors in the World

19 Insurance Industry Total Financial Assets, $5,000 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 $3,335.0 $ billions $3,772.8 $4,130.3 Property/Casualty $4,350.7 $939.8 $1,059.7 $1,160.9 $1,250.4 $1, Sources: Board of Governors of the Federal Reserve System; Insurance Info. Institute; $4,708.8 Life Insurers are among the largest investors in the world, facilitating global growth in the private and public sectors

20 Selected Insurance Industry Financial Assets, 2006 $2,000 $1,750 $1,500 $1,250 $1,000 $750 $500 $250 $0 $1,881.8 $278.6 $232.5 Corporate and foreign bonds $ billions $1,405.2 Corporate stocks $335.2 $33.2 Municipal securities Property/Casualty $197.3 $470.5 U.S. government securities Life As the world s largest muni bond investor, insurers fund hundreds of billions of dollars in state and local projects such as schools, roads and health care Sources: Board of Governors of the Federal Reserve System; Insurance Info. Institute;

21 INSURERS AS EDUCATORS Educated Consumers Make the Best Customers

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23 Free Home Inventory Software 400,000+ downloads and counting!

24 Helping businesses learn their insurance needs

25 Spanish language information

26 Information & Research

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28 INSURERS AS PROMOTERS OF PUBLIC SAFETY Investments in Public Safety & Security

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33 INSURERS AS BUILDERS IN TIMES OF GREATEST NEED Catastrophic Losses: Insurers Most Critical Job

34 Most of US Population & Property Has Major CAT Exposure Is Anyplace Safe?

35 U.S. Insured Catastrophe Losses* $120 $100 $80 $60 $40 $20 $0 $7.5 $2.7 $4.7 $ Billions 2006/07 were welcome respites was by far the worst year ever for insured catastrophe losses in the US, but the worst has yet to come. $100 Billion CAT year is coming soon $22.9 $5.5 $16.9 $8.3 $7.4 $2.6 $10.1 $8.3 $4.6 $26.5 $5.9 $12.9 $ ?? *Excludes $4B-$6b offshore energy losses from Hurricanes Katrina & Rita. Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01. Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B. Source: Property Claims Service/ISO; Insurance Information Institute $61.9 $9.2 $6.7 $100.0

36 Catastrophe Claims and Losses in the U.S., * Losses ($ millions) $70 $60 $50 $40 $30 $20 $10 Insurers paid $155 billion in catastrophe losses on 18.3 million claims arising from 192 events between 2000 and $ $4.6 $ $ $27.5 $ $ $ Claims (000) $ Losses ($ millions) Claims (000) 0 Source: ISO s Property Claim Services Unit; Insurance Information Institute;

37 States With Largest Insured Catastrophe Losses in 2007 $1,400 $1,200 $1,000 $800 $600 $1,230 $747 $677 $ Millions 2007 CAT STATS 1.18 million CAT claims across 41 states arising 23 catastrophic events $400 $200 $320 $272 $270 $262 $223 $202 $200 $200 $0 CA MN TX GA IL OK KS MO NY CO AL Source: PCS/ISO; Insurance Information Institute.

38 Distribution of 2007 US CAT Losses, by Type and Insured Loss $ Billions Personal (home, condo, rental, contents etc.) accounted for 68% of all US insured CAT losses paid in CAT claim count was 1.18 million. Source: PCS division of ISO. Commercial, $1.3, 20% Personal, $4.4, 68% Vehicle, $0.8, 12%

39 Top Catastrophic Wildland Fires In Oct , 1978 Los Angeles, Ventura Cos., CA Nov , 1980 Bradbury, Pacific Palisades, Malibu, Sunland, Carbon Canyon, Lake Elsinore, CA Oct. 9-10, 1982 Los Angeles, Ventura, Orange Cos., CA The United States, Sep , 1970 Oakland-Berkeley Hills, CA Nov , 1980 Los Angeles, San Bernardino, Orange, Riverside, San Diego Cos., CA Jul , 1977 Santa Barbara, Montecito, CA Insured Losses (Millions 2007 $) Oct , 1991: Oakland, Alameda Cos., CA Oct. 2003: Southern CA Fires Oct. 2007: Southern CA Fires* Nov. 2-3, 1993 Los Angeles Co., CA Oct , 1993 Orange Co., CA Jun. 27-Jul. 2, 1990 Santa Barbara County, CA May 10-16, 2000 Cerro Grande, NM July 2007: Lake Tahoe, CA** Jun , 2002 Rodeo-Chediski Complex, AZ May 17-20, 1985 Florida Sep , 1979 Hollywood Hills, CA $154.4 $138.4 $132.6 $108.3 $68.4 $63.6 $47.7 $40.2 $34.4 $14.3 $168.7 $538.4 $502.5 $420.7 $2,294.4 $2,260.0 $2,589.3 Fourteen of the top 17 catastrophic wildfires since 1970 occurred in California $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 *Estimate from CA Insurance Dept., Jan. 10, Source: ISO's Property Claim Services Unit; California Department of Insurance; Insurance Information Institute.

40 Inflation-Adjusted U.S. Insured Catastrophe Losses By Cause of Loss, ¹ Fire, $6.6, 2.2% Wind/Hail/Flood, $9.3, 3.1% Earthquakes, $19.1, 6.4% Winter Storms, $23.1, 7.8% Terrorism, $22.3, 7.5% Civil Disorders, $1.1, 0.4% All Tropical Cyclones, $137.7, 46.3% Water Damage, $0.4, 0.1% Utility Disruption, $0.2, 0.1% Tornadoes, $77.3, 26.0% Insured disaster losses totaled $297.3 billion from (in 2006 dollars). Wildfires accounted for approximately $6.6 billion of these 2.2% of the total. 1 Catastrophes are all events causing direct insured losses to property of $25 million or more in 2006 dollars. Catastrophe threshold changed from $5 million to $25 million beginning in Adjusted for inflation by the III. 2 Excludes snow. 3 Includes hurricanes and tropical storms. 4 Includes other geologic events such as volcanic eruptions and other earth movement. 5 Does not include flood damage covered by the federally administered National Flood Insurance Program. 6 Includes wildland fires. Source: Insurance Services Office (ISO)..

41 Catastrophic Hurricane Claims and Losses in the U.S., * Losses ($ millions) $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 Insurers paid $89.1 billion in hurricane losses on 7.7 million claims between 1998 and $3,315 $2, $430 $1,775 2,259 $22,900 3,316 $58, Losses ($ millions) Claims (000) Claims (000) Source: ISO s Property Claim Services Unit; Insurance Information Institute;

42 Global Insured Catastrophe Losses by Region, North America accounted for 70% of global catastrophe losses $ Billions Seas/Space Africa Oceania/Australia South America Asia Europe North America* Notes: figures for N. America include US only figure includes only property losses from 9/11. Source: Insurance Information Institute compiled from Swiss Re sigma issues.

43 HURRICANE KATRINA Rebuilding Communities & Lives

44 Sources: ISO/PCS; Insurance Information Institute. Top 10 Most Costly Hurricanes in US History, (Insured Losses, $2005) $45 $40 $35 $30 Seven of the 10 most expensive hurricanes in US history occurred in the 14 months from Aug Oct. 2005: $41.1 $ Billions $25 $20 $15 $10 $5 Katrina, Rita, Wilma, Charley, Ivan, Frances & Jeanne $3.5 $3.8 $4.8 $5.0 $6.6 $7.4 $7.7 $10.3 $21.6 $0 Georges (1998) Jeanne (2004) Frances (2004) Rita (2005) Hugo (1989) Ivan (2004) Charley (2004) Wilma (2005) Andrew (1992) Katrina (2005)

45 Insured Loss & Claim Count for Major Storms of 2005* Insured Loss Claims Insured Loss ($ Billions $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 Hurricanes Katrina, Rita, Wilma & Dennis produced a record 3.3 million claims 104 $ $5.0 1,047 $10.3 1,744 $41.1 2,000 1,800 1,600 1,400 1,200 1, Claims (thousands) Dennis Rita Wilma Katrina Size of Industry Loss ($ Billions) *Property and business interruption losses only. Excludes offshore energy & marine losses. Source: ISO/PCS as of June 8, 2006; Insurance Information Institute.

46 Hurricane Katrina Claim Status on Storm s 1 st Anniversary* 95% of the 1.2 million homeowners insurance claims in Louisiana & Mississippi are settled, with just 2% in dispute In Process, 3% Mediation/ Litigation, 2% Settled, 95% *Hurricane Katrina made its north Gulf coast landfall August 29, Source: Insurance Information Institute survey, August 2006.

47 Hurricane Katrina Claim Status on Storm s 2 nd Anniversary* 99% of the 1.2 million homeowners insurance claims in Louisiana & Mississippi were settled as of the storm s second anniversary in 2007 Unsettled**, 1% Settled, 99% *Hurricane Katrina made its north Gulf coast landfall August 29, **Unsettled implies that the claim is in the process of settlement, involved in mediation or litigated. Source: Insurance Information Institute survey, August 2007.

48 Hurricane Katrina Insured Loss Distribution by State ($ Millions)* Florida, $572.0, 1.4% Alabama, $1,032, 2.5% Mississippi, $13,605, 33.5% Total Insured Losses = $ Billion Tennessee, $59.0, 0.1% Georgia, $36.0, 0.1% Mississippi accounted for 33.5% of the insured losses paid and 29.5% of the claims filed Louisiana, $25,275, 62.3% *As of June 8, 2006 Source: PCS division of ISO.

49 Growth in Mississippi Construction Component of GDP Pre/Post-Katrina Value of Construction GDP $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 16.8% Insurance dollars helped construction spending surge in MS $3,159 $3,046 $3,121 $2,879 $2,917 $2,889 $2, % -1.0% 0.2% Value of Construction GDP % Growth in Construction GDP 9.2% -3.6% $3, % $4, % Sources: US Bureau of Economic Analysis; Insurance Information Inst. 15.6% 20% 15% 10% 5% 0% -5% Growth in Construction GDP

50 Insured Offshore Energy Losses for Recent Major Gulf Storms $ Billions $4.0 $3.0 $2.0 Hurricanes Katrina, Rita and Ivan cost energy insurers at least $7 billion $2.0 $2.25 $3.0 $1.0 $0.0 Katrina (2005) Ivan (2004)* Rita (2005) Sources: Insurance Information Institute research estimates. *Midpoint of estimated range for $2.0 to $2.5 billion)

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