What are the most significant short- and long-term effects of the recession on casualty insurance?
Though the nature of this recession is unprecedented, making predictions hazardous, there are a few effects that can be expected across the market: • The market likely will harden throughout 2009 due to multiple factors pressuring rates upward. These factors include increased need for reinsurance as direct writers look for capital relief obtained by lowering retentions; lower investment portfolio returns cutting into insurers’ ability to offset high loss ratios and still maintain profitability; increased liability claims for lines such as directors and officers liability, errors and omissions, and professional liability resulting from the economic turmoil; a poor loss year in 2008 with weather-related catastrophe losses among the highest on record. • Investment losses for insurers will result in reduced capacity, pressuring rates further. This also may result in more difficulty in obtaining coverage in some areas, especially those prone to catastrophes. • Major increases in surety loss
