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A Firm Foundation The Insurance Industry & Its Contributions to Society

This article explores the key roles that insurers play in society, including as claim payers, philanthropists, contributors to the economy, employers, taxpayers, investors, educators, promoters of public safety, and builders in times of catastrophes.

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A Firm Foundation The Insurance Industry & Its Contributions to Society

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  1. A Firm FoundationThe 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 10038 Tel: (212) 346-5520 Fax: (212) 732-1916 bobh@iii.org  www.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

  3. INSURERS AS CLAIMS PAYERSTrillions and Trillions Paid(& Counting)

  4. Incurred Losses, Property/Casualty Insurance 2000-2007* $ billions P/C insurers paid out $275 billion each year on average to millions of people and businesses since 2000. *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/

  5. Cumulative Incurred Losses, P/C Insurance 2000-2007* $ Billions P/C insurers paid more that $2.2 trillion in claims to tens of millions of people and businesses since 2000 *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/

  6. Life Insurance Claims & Benefits Paid, 2000-2006* $ Billions Life insurers paid more than $2.3 trillion in claims and benefits between 2000 and 2006 *On a direct basis before reinsurance. Sources: NAIC Annual Statement Database, via Highline Data, LLC; Insurance Info. Institute.

  7. Share of Losses Paid by Reinsurers, by Disaster* Reinsurance is playing an increasingly important role in the financing of mega-CATs; Reins. Costs are skyrocketing *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.

  8. INSURERS AS PHILANTHROPISTSInsurers are Generous withTheir Money and Time

  9. Insurance Industry Charitable Contributions to U.S. Beneficiaries, 2006 $ 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. Sources: The Conference Board; Insurance Info. Institute; http://www.iii.org/economics/toc/

  10. Top 10 Total Contributions Per Worldwide Employee By Industry, 2005* Charitable contributions per employee totaled $560 in 2005, 7th highest of any industry *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/

  11. INSURERS AS CONTRIBUTORS TO THE ECONOMYInsurers are an Important Segment of the Economy

  12. Insurance Sector’s Share of Gross Domestic Product (GDP), 2001-2005 Insurance GDP 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/

  13. INSURERS AS EMPLOYERSGood Jobs, Good Pay

  14. Insurance Carriers Employment and Payroll, 2000-2007 Insurers employed more than 2.3 million people in 2007, with total wages approaching $200 billion. Source: U.S. Dept. of Labor, Bureau of Labor Statistics; U.S. Dept. of Commerce, Bureau of Economic Analysis; Insurance Information Institute.

  15. INSURERS AS TAXPAYERSInsurers are a Major Source of Government Revenue

  16. Insurance Industry Taxes Paid and Incurred, 2002-2006* P/C and Life insurers paid $174 billion in taxes between 2002 and 2006 *Based on page 3, Annual Statement, Liabilities, Surplus and Other Funds. Sources: Insurance Info. Institute; http://www.iii.org/economics/toc/

  17. INSURERS AS INVESTORSInsurers are a Among theLargest Investors in the World

  18. Insurance IndustryTotal Financial Assets, 2002-2006 $ billions Insurers are among the largest investors in the world, facilitating global growth in the private and public sectors Sources: Board of Governors of the Federal Reserve System; Insurance Info. Institute; http://www.iii.org/economics/toc/

  19. Selected Insurance IndustryFinancial Assets, 2006 $ 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 Sources: Board of Governors of the Federal Reserve System; Insurance Info. Institute; http://www.iii.org/economics/toc/

  20. INSURERS AS EDUCATORSEducated Consumers Makethe Best Customers

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

  22. Helping businesses learn their insurance needs

  23. Spanish language information

  24. Information & Research

  25. INSURERS AS PROMOTERS OF PUBLIC SAFETYInvestments in Public Safety& Security

  26. INSURERS AS BUILDERS IN TIMES OF GREATEST NEEDCatastrophic Losses: Insurers Most Critical Job

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

  28. U.S. Insured Catastrophe Losses* $ Billions $100 Billion CAT year is coming soon 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. *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

  29. Catastrophe Claims and Lossesin the U.S., 2000-2007* Insurers paid $155 billion in catastrophe losses on 18.3 million claims arising from 192 events between 2000 and 2007 Source: ISO’s Property Claim Services Unit; Insurance Information Institute; http://www.iii.org/economics/toc/

  30. States With Largest Insured Catastrophe Losses in 2007 2007 CAT STATS • 1.18 million CAT claims across 41 states arising • 23 catastrophic events Source: PCS/ISO; Insurance Information Institute.

  31. 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 2007. CAT claim count was 1.18 million. Source: PCS division of ISO.

  32. Top Catastrophic Wildland Fires In The United States, 1970-2007 Insured Losses (Millions 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.

  33. Inflation-Adjusted U.S. Insured Catastrophe Losses By Cause of Loss, 1987-2006¹ 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. 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. Source: Insurance Services Office (ISO)..

  34. Catastrophic Hurricane Claims and Losses in the U.S., 1998-2005* Insurers paid $89.1 billion in hurricane losses on 7.7 million claims between 1998 and 2005 Source: ISO’s Property Claim Services Unit; Insurance Information Institute; http://www.iii.org/economics/toc/

  35. Global Insured Catastrophe Losses by Region, 2001-2007 $ Billions North America accounted for 70% of global catastrophe losses 2001-2007 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.

  36. HURRICANE KATRINARebuilding Communities & Lives

  37. Top 10 Most Costly Hurricanes in US History, (Insured Losses, $2005) 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 Sources: ISO/PCS; Insurance Information Institute.

  38. Insured Loss & Claim Count for Major Storms of 2005* Hurricanes Katrina, Rita, Wilma & Dennis produced a record 3.3 million claims *Property and business interruption losses only. Excludes offshore energy & marine losses. Source: ISO/PCS as of June 8, 2006; Insurance Information Institute.

  39. Hurricane Katrina Claim Status on Storm’s 1st Anniversary* 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.

  40. Hurricane Katrina Claim Status on Storm’s 2nd Anniversary* 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.

  41. Hurricane Katrina Insured Loss Distribution by State ($ Millions)* Mississippi accounted for 33.5% of the insured losses paid and 29.5% of the claims filed Total Insured Losses = $40.579 Billion *As of June 8, 2006 Source: PCS division of ISO.

  42. 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.

  43. Insured Offshore Energy Losses for Recent Major Gulf Storms 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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