Specialty Lines Insurance Market to Get Tighter?

We are beginning to hear speculation, and some evidence, that the current financial crisis could spread beyond AIG and impact the insurance industry more broadly, including the specialty lines insurance segment.  Along with the rest of the insurance industry, the specialty lines insurance market has been soft (highly competitive).  The key questions (concerns) for our business are whether the financial crisis will have a broad and serious impact on the specialty insurance industry, and whether the impact will be significant enough to cause a serious capacity reduction and the pricing increases that go with it.

Financial challenges in the insurance business have spread beyond AIG (see our prior post, & here & here).  Recently the Hartford needed a $2.5 billion investment (see here), and XL announced significant investment losses (see here).  And an article in the New York Times (see here) suggests that the crisis could spread to other insurers:

But now a wave of losses is moving throughout the insurance industry, caused by the seize-up of the credit markets and declining investment values…If the investment losses keep mounting, they will start eating away at insurers’ capital.

Could these losses result in a harder market, or just trigger a market share grab by stronger insurers?  While it is too early to tell where this financial crisis is going to take the specialty insurance market, and we are not going to make any predictions, there is more than enough evidence to be concerned.

Update:  Add ACE to the list of insurers reporting significant investment losses ($1.5 billion, see here).

 

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Comments

[Bryan]

Good post. I actually think we'll see both a harder market and the some well positioned players grabbing more market share. That said, it's hard to predict anything in today's climate.

[Debtsettlement]

Your blog is very nice.
Thank you.

[Insuranceguide]

This blog is really nice and informative.
Thank you.

[Christine]

It's scary to think that, given the current financial crisis, people may not be able to afford insurance coverage for their autos and homes. And small businesses may not be able to afford the general liability coverages they need to do business. What a mess!