a firm foundation the insurance industry & its contributions to society robert p. hartwig,...
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A Firm Foundation The Insurance Industry &Its Contributions to Society
Robert P. Hartwig, Ph.D., CPCU, PresidentInsurance Information Institute 110 William Street New York, NY 10038
Tel: (212) 346-5520 Fax: (212) 732-1916 [email protected] www.iii.org
St. John’s UniversitySchool of Risk Management, Insurance &
Actuarial Science
New York, NYApril 10, 2008
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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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INSURERS AS CLAIMS PAYERS
Trillions and Trillions Paid(& Counting)
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Incurred Losses, Property/Casualty Insurance 2000-2007*
$218.7
$273.1 $266.9 $267.7 $277.6
$316.9
$283.8$298.6
$0
$50
$100
$150
$200
$250
$300
$350
00 01 02 03 04 05 06 07
*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; http://www.iii.org/economics/toc/
$ billions
P/C insurers paid out $275 billion each year on average to millions of people and businesses since 2000.
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Cumulative Incurred Losses, P/C Insurance 2000-2007*
$218.7
$491.8
$758.7
$1,026.4
$1,304.0
$1,620.9
$1,904.8
$2,203.4
$0
$500
$1,000
$1,500
$2,000
$2,500
00 01 02 03 04 05 06 07*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; http://www.iii.org/economics/toc/
$ BillionsP/C insurers paid more that $2.2
trillion in claims to tens of millions
of people and businesses since
2000
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Life Insurance Claims & Benefits Paid, 2000-2006*
$319.4
$282.8 $288.7$301.5
$331.2
$370.1
$426.9
$200
$250
$300
$350
$400
$450
$500
00 01 02 03 04 05 06
*On a direct basis before reinsurance.Sources: NAIC Annual Statement Database, via Highline Data, LLC; Insurance Info. Institute.
$ Billions
Life insurers paid more than $2.3 trillion in claims and benefits
between 2000 and 2006
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Share of Losses Paid by Reinsurers, by Disaster*
30%25%
60%
20%
45%
0%
10%
20%
30%
40%
50%
60%
70%
Hurricane Hugo(1989)
Hurricane Andrew(1992)
Sept. 11 TerrorAttack (2001)
2004 HurricaneLosses
2005 HurricaneLosses
*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 2005.Sources: Wharton Risk Center, Disaster Insurance Project; Insurance Information Institute.
Reinsurance is playing an increasingly
important role in the financing of mega-CATs; Reins. Costs
are skyrocketing
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INSURERS AS PHILANTHROPISTS
Insurers are Generous withTheir Money and Time
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Insurance Industry Charitable Contributions to U.S. Beneficiaries, 2006
$921.6
$147.1$67.8
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
Banks Insurance Finance
Sources: The Conference Board; Insurance Info. Institute; http://www.iii.org/economics/toc/
$ Millions
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.
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Top 10 Total Contributions Per Worldwide Employee By Industry, 2005*
$339
$367
$547
$560
$629
$713
$784
$818
$1,549
$5,585
$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000
Computers & Technology
Food, beverage & tobacco
Other manufacturing**
Insurance
Utilities
Banks
Finance
Petroleum, gas & mining
Printing, publishing & media
Pharmaceuticals
*Companies not reporting worldwide employee figures are excluded. **Includes other diversified manufacturing.Sources: The Conference Board; Insurance Info. Institute; http://www.iii.org/economics/toc/
Charitable contributions per employee totaled $560 in 2005,
7th highest of any industry
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INSURERS AS CONTRIBUTORS TO
THE ECONOMY
Insurers are an Important Segment of the Economy
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$234.4 $237.4
$255.0
$295.6 $296.1
2.3% 2.3% 2.3%2.5% 2.4%
$200
$220
$240
$260
$280
$300
$320
01 02 03 04 05
0%
1%
2%
3%
% o
f T
ota
l G
DP
Insurer GDP% of Total GDP
Insurance Sector’s Share of Gross Domestic Product (GDP), 2001-2005
The insurance industry accounted for nearly $300 billion or 2.4% of
US GDP in 2005
Source: Insurance Information Institute: http://www.iii.org/economics/toc/
Insu
ran
ce
GD
P
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INSURERS AS EMPLOYERS
Good Jobs, Good Pay
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Insurance Carriers Employment and Payroll, 2000-2007
2,220.6 2,233.2 2,266.0 2,308.12,258.6
2,259.3 2,303.72,233.7
$128.9$137.0
$143.6$154.0
$166.5$173.2
$183.4
1,500
2,000
2,500
3,000
00 01 02 03 04 05 06 07
No. of
Em
plo
yee
s (0
00)
$0
$50
$100
$150
$200
An
nu
al
Payro
ll (
$ b
illi
on
s)
No. of Employees Annual Payroll
Source: U.S. Dept. of Labor, Bureau of Labor Statistics; U.S. Dept. of Commerce, Bureau of Economic Analysis; Insurance Information Institute.
Insurers employed more than 2.3 million people in 2007, with total wages approaching $200 billion.
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INSURERS AS TAXPAYERS
Insurers are a Major Source of Government Revenue
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Insurance Industry Taxes Paid and Incurred, 2002-2006*
$20.0 $19.6
$22.4 $22.2
$28.5
$12.6$11.0 $11.1 $11.3
$15.2
$0
$5
$10
$15
$20
$25
$30
02 03 04 05 06
Property/Casualty Life
*Based on page 3, Annual Statement, Liabilities, Surplus and Other Funds.Sources: Insurance Info. Institute; http://www.iii.org/economics/toc/
P/C and Life insurers paid $174 billion in taxes between
2002 and 2006
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INSURERS AS INVESTORS
Insurers are a Among theLargest Investors in the World
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Insurance IndustryTotal Financial Assets, 2002-2006
$939.8 $1,059.7 $1,160.9 $1,250.4 $1,365.4
$3,335.0$3,772.8
$4,130.3$4,350.7
$4,708.8
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$5,000
02 03 04 05 06
Property/Casualty Life
Sources: Board of Governors of the Federal Reserve System; Insurance Info. Institute; http://www.iii.org/economics/toc/
$ billions
Insurers are among the largest investors in the world,
facilitating global growth in the private and public sectors
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Selected Insurance IndustryFinancial Assets, 2006
$278.6 $232.5$335.2
$197.3
$1,881.8
$1,405.2
$33.2
$470.5
$0
$250
$500
$750
$1,000
$1,250
$1,500
$1,750
$2,000
Corporate andforeign bonds
Corporatestocks
Municipalsecurities
U.S.governmentsecurities
Property/Casualty Life
Sources: Board of Governors of the Federal Reserve System; Insurance Info. Institute; http://www.iii.org/economics/toc/
$ billions
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
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INSURERS AS EDUCATORS
Educated Consumers Makethe Best Customers
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Free Home Inventory Software
400,000+ downloads
and counting!
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Helping businesses learn their insurance
needs
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Spanish language
information
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Information & Research
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INSURERS AS PROMOTERS OF PUBLIC SAFETY
Investments in Public Safety& Security
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INSURERS AS BUILDERS IN
TIMES OF GREATEST NEED
Catastrophic Losses: Insurers Most Critical Job
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Most of US Population & Property Has Major CAT Exposure
Is Anyplace
Safe?
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U.S. Insured Catastrophe Losses*$7
.5
$2.7
$4.7
$22.
9
$5.5 $1
6.9
$8.3
$7.4
$2.6 $1
0.1
$8.3
$4.6
$26.
5
$5.9 $1
2.9 $2
7.5
$6.7
$100
.0
$61.
9
$9.2
$0
$20
$40
$60
$80
$100
$120
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
20??
*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
$ Billions
2006/07 were welcome respites. 2005 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
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Catastrophe Claims and Lossesin the U.S., 2000-2007*
$4.6 $5.9
$12.9
$6.5
$27.5
$61.9
$9.2
$26.51.4
1.8
2.6
3.4
2.3
1.21.6
4.0
$0
$10
$20
$30
$40
$50
$60
$70
00 01 02 03 04 05 06 07
Los
ses
($ m
illi
ons)
0
1
1
2
2
3
3
4
4
5
Cla
ims
(000
)
Losses ($ millions) Claims (000)
Source: ISO’s Property Claim Services Unit; Insurance Information Institute; http://www.iii.org/economics/toc/
Insurers paid $155 billion in catastrophe losses on
18.3 million claims arising from 192 events between 2000 and 2007
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States With Largest Insured Catastrophe Losses in 2007
$ Millions
$1,230
$747$677
$320$223 $202 $200 $200
$262$270$272
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
CA MN TX GA IL OK KS MO NY CO ALSource: PCS/ISO; Insurance Information Institute.
2007 CAT STATS
•1.18 million CAT claims across 41 states arising
•23 catastrophic events
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Distribution of 2007 US CAT Losses, by Type and Insured Loss
Personal, $4.4 , 68%
Commercial, $1.3 , 20%
Vehicle, $0.8 , 12%Personal (home, condo, rental, contents etc.)
accounted for 68% of all US insured
CAT losses paid in 2007. CAT claim
count was 1.18 million.
Source: PCS division of ISO.
$ Billions
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$14.3
$34.4
$40.2
$47.7
$63.6
$68.4
$108.3
$132.6
$138.4
$154.4
$168.7
$420.7
$502.5
$538.4
$2,260.0
$2,294.4
$2,589.3
$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000
Sep. 12-18, 1979 Hollywood Hills, CA
Oct. 9-10, 1982 Los Angeles, Ventura, Orange Cos., CA
Nov. 16-17, 1980 Bradbury, Pacific Palisades, Malibu, Sunland,Carbon Canyon, Lake Elsinore, CA
Oct. 23-25, 1978 Los Angeles, Ventura Cos., CA
May 17-20, 1985 Florida
Jul. 26-27, 1977 Santa Barbara, Montecito, CA
Nov. 24-30, 1980 Los Angeles, San Bernardino, Orange,Riverside, San Diego Cos., CA
Sep. 22-30, 1970 Oakland-Berkeley Hills, CA
Jun. 23-28, 2002 Rodeo-Chediski Complex, AZ
July 2007: Lake Tahoe, CA**
May 10-16, 2000 Cerro Grande, NM
Jun. 27-Jul. 2, 1990 Santa Barbara County, CA
Oct. 27-28, 1993 Orange Co., CA
Nov. 2-3, 1993 Los Angeles Co., CA
Oct. 2007: Southern CA Fires*
Oct. 2003: Southern CA Fires
Oct. 20-21, 1991: Oakland, Alameda Cos., CA
Insured Losses (Millions 2007 $)
Top Catastrophic Wildland Fires In The United States, 1970-2007
Fourteen of the top 17
catastrophic wildfires since
1970 occurred in California
*Estimate from CA Insurance Dept., Jan. 10, 2008. Source: ISO's Property Claim Services Unit; California Department of Insurance; Insurance Information Institute.
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Inflation-Adjusted U.S. Insured Catastrophe Losses By Cause of Loss,
1987-2006¹
Fire, $6.6 , 2.2%
Tornadoes, $77.3 , 26.0%
All Tropical Cyclones, $137.7 ,
46.3%
Civil Disorders, $1.1 , 0.4%
Utility Disruption, $0.2 , 0.1%
Water Damage, $0.4 , 0.1%Wind/Hail/Flood,
$9.3 , 3.1%
Earthquakes, $19.1 , 6.4%
Winter Storms, $23.1 , 7.8%
Terrorism, $22.3 , 7.5%
Source: Insurance Services Office (ISO)..
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 1997. 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.
Insured disaster losses totaled $297.3 billion from
1987-2006 (in 2006 dollars). Wildfires accounted for
approximately $6.6 billion of these—2.2% of the total.
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Catastrophic Hurricane Claims and Losses in the U.S., 1998-2005*
$3,315$430 $1,775
$22,900
$58,337
$2,315
730 696
134
528
2,259
3,316
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
98 99 02 03 04 05
Los
ses
($ m
illi
ons)
0
500
1000
1500
2000
2500
3000
3500
Cla
ims
(000
)
Losses ($ millions) Claims (000)
Source: ISO’s Property Claim Services Unit; Insurance Information Institute; http://www.iii.org/economics/toc/
Insurers paid $89.1 billion in hurricane losses on 7.7 million claims between 1998 and 2005
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Global Insured Catastrophe Losses by Region, 2001-2007
0
10
20
30
40
50
60
70
80
90
2001 2002 2003 2004 2005 2006 2007
Seas/SpaceAfricaOceania/AustraliaSouth AmericaAsiaEuropeNorth America*
Notes: 2001-03 figures for N. America include US only. 2001 figure includes only property losses from 9/11. Source: Insurance Information Institute compiled from Swiss Re sigma issues.
North America accounted for 70% of global
catastrophe losses 2001-2007
$ Billions
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HURRICANE KATRINA
Rebuilding Communities & Lives
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Top 10 Most Costly Hurricanes in US History, (Insured Losses, $2005)
$3.5 $3.8 $4.8 $5.0$6.6 $7.4 $7.7
$10.3
$21.6
$41.1
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
Georges(1998)
Jeanne(2004)
Frances(2004)
Rita (2005)
Hugo(1989)
Ivan (2004)
Charley(2004)
Wilma(2005)
Andrew(1992)
Katrina(2005)
$ B
illi
ons
Sources: ISO/PCS; Insurance Information Institute.
Seven of the 10 most expensive hurricanes in US history
occurred in the 14 months from Aug. 2004 – Oct. 2005:
Katrina, Rita, Wilma, Charley, Ivan, Frances & Jeanne
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Insured Loss & Claim Count for Major Storms of 2005*
$1.1
$41.1
$10.3$5.0
104
383
1,047
1,744
$0$5
$10$15$20
$25$30$35
$40$45
Dennis Rita Wilma Katrina
Size of Industry Loss ($ Billions)
Insu
red
Lo
ss ($ B
illio
ns)
02004006008001,0001,2001,4001,6001,8002,000
Cla
ims (th
ou
san
ds)
Insured Loss Claims
*Property and business interruption losses only. Excludes offshore energy & marine losses.
Source: ISO/PCS as of June 8, 2006; Insurance Information Institute.
Hurricanes Katrina, Rita, Wilma & Dennis produced a record 3.3
million claims
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Hurricane Katrina Claim Status on Storm’s 1st Anniversary*
In Process, 3%
Mediation/ Litigation, 2%
Settled, 95%
95% of the 1.2 million
homeowners insurance claims in Louisiana & Mississippi are
settled, with just 2% in dispute
*Hurricane Katrina made its north Gulf coast landfall August 29, 2005.Source: Insurance Information Institute survey, August 2006.
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Hurricane Katrina Claim Status on Storm’s 2nd Anniversary*
Unsettled**, 1%
Settled, 99%
99% of the 1.2 million homeowners insurance claims in
Louisiana & Mississippi were settled as of the storm’s second
anniversary in 2007
*Hurricane Katrina made its north Gulf coast landfall August 29, 2005.**Unsettled implies that the claim is in the process of settlement, involved in mediation or litigated.Source: Insurance Information Institute survey, August 2007.
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Hurricane Katrina Insured Loss Distribution by State ($ Millions)*
Mississippi, $13,605 , 33.5%
Louisiana, $25,275 , 62.3%
Tennessee, $59.0 , 0.1%Florida, $572.0 , 1.4%
Georgia, $36.0 , 0.1%Alabama, $1,032 ,
2.5%
*As of June 8, 2006Source: PCS division of ISO.
Mississippi accounted for 33.5% of the insured losses
paid and 29.5% of the claims filed
Total Insured Losses =
$40.579 Billion
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$2,879 $2,917 $2,889 $2,894$3,159 $3,046 $3,121
$3,702
$4,281
16.8%
1.3%0.2%
9.2%
-3.6%
2.5%
18.6%
15.6%
-1.0%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
98 99 00 01 02 03 04 05 06
Val
ue
of
Co
nst
ruct
ion
GD
P
-5%
0%
5%
10%
15%
20%
Gro
wth
in
Co
nst
ruct
ion
GD
P
Value of Construction GDP
% Growth in Construction GDP
Growth in Mississippi Construction Component of GDP Pre/Post-Katrina
Insurance dollars helped construction
spending surge in MS
Sources: US Bureau of Economic Analysis; Insurance Information Inst.
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Insured Offshore Energy Losses for Recent Major Gulf Storms
$2.0$2.25
$3.0
$0.0
$1.0
$2.0
$3.0
$4.0
Katrina (2005) Ivan (2004)* Rita (2005)
$ B
illi
ons
Hurricanes Katrina, Rita and Ivan cost energy
insurers at least $7 billion
Sources: Insurance Information Institute research estimates. *Midpoint of estimated range for $2.0 to $2.5 billion)
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Insurance Information Institute On-Line
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