Market Outlook 2010
Thanks to a relatively quiet 2009 with regard to catastrophe losses in the US such as hurricanes and earthquakes, the overall profitability of the Property and Casualty industry has rebounded nicely from 2008, with the first nine months results reflecting a Combined Ratio (Incurred Losses + Expenses/ Earned Premiums) that improved almost 5% from 2008. Some of this improvement was the result of further releases of loss reserves for asbestos and environmental claims, but those benefits have largely run their course and will not be repeated in 2010. Investment portfolios have stabilized, but overall demand is still down due to reduced employment levels, payrolls, sales and inventories, which has made premium growth difficult, if not impossible, for most carriers.

Now that some of the financial crisis has largely passed for many carriers, including those impacted the most by investment losses tied to subprime mortgages such as AIG and Hartford, the pricing outlook for insurance buyers remains quite favorable for most of 2010, largely due to a continuing oversupply of capacity. Conventional wisdom, for what that's worth, points to modest premium increases by late 2010, and perhaps more significant increases in 2011 and beyond. This, of course, will vary significantly by region as well as by line of coverage. For example, products tied to financial strength and performance, such as Directors & Officers Liability, could see significant increases for those firms whose balance sheets and income statements have suffered the worst in this recession.

One result of the overall financial crisis has been the drive for further reforms and a higher level of regulation at the federal level, leading to the potential creation of the Consumer Financial Protection Agency as well as a Federal Office of Insurance, both of which will likely add some additional costs to the system.

On the Employee Benefits side of the insurance industry, the Healthcare Reform buzz has subsided with the recent election in Massachusetts. Scott Brown's election gave Senate Republicans the power to block consideration of the House/Senate Democratic health care reform bill indefinitely via a filibuster. Although this is all far from over, many employer mindsets are now changing from wait-and-see to acting on initiatives they have been considering.

The biggest wild card remains Healthcare Reform, and what it will eventually look like once Congress combines the Senate and House bills and figures out how to pay for it. The short-term impacts of healthcare reform legislation have received most of the attention in the media, but what remains largely unknown are the long-term effects since many of the key provisions won't take effect until 2013 or 2014 at the earliest.

Health Risk Management (HRM) and Wellness will no doubt become a higher priority for most employers since it may very well be the only means to control costs in the long run. Additionally, as employers continually strive to become more efficient in the workplace, HRM and Wellness will also have a positive long-term impact on employee productivity. Of the total cost of health, 25% is comprised of health care costs, 9% is worker's compensation, 6% is absenteeism, and 60% is attributed to presenteeism!

Gibson's 4th annual Healthcare Summit will take place on March 9th. You can log onto www.gibsonins.com to reserve your seat and enjoy an interactive morning with our blue ribbon panelists who will provide you with an overview of both the short-term and long-term impact of Reforming Healthcare from every perspective.