Commercial property insurers see tougher times

Chew Xiang in the Business Times (Singapore): A bumper 2009 for commercial property insurers could depress premiums and hurt returns this year, according to Shivan Subramaniam, chairman and CEO of FM Global, a mutual commercial insurer. The lack of natural disasters and the recovery in financial markets means insurers head into 2010 with very strong balance sheets and underwriting results, Mr Subramaniam said.

For 2009, industry-wide net after-tax income for US property/casualty insurers is expected to have risen more than eight-fold to US$30.6 billion, from US$3.8 billion in 2008, according to reports. … 'You're almost pushed to write more business, and if everybody does that, the only thing is that prices go down,' Mr Subramaniam told BT. Falling premiums could hurt insurers badly if even a moderate disaster happens this year, he said. And there has already been a massive earthquake in Chile.

'Chile could turn out to be a very expensive loss for the industry,' Mr Subramaniam said. 'The Chile quake had 600 times more force than Haiti - and Chile is the world centre for copper mining.' Initial estimates of US$2 billion in insured losses are likely too low, he said.

The threat of climate change could also put a dent in profitability, according to Mr Subramaniam. 'We can't really say whether there is climate change or not, but what we do know is there is an increase in frequency and severity of those locations that are exposed to flood, wind and earthquake,' he said….

The eyewall of hurricane Katrina, 2005, from NOAA