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Nearly 70 percent of the P/C insurance industry’s investment portfolio is held in high-quality corporate and government bonds, with just under 20 percent in highly diversified stock holdings. Most of the remaining 10 percent is held as cash, or very short-term securities, the panelists explained.

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The Federal Reserve announced in August 2011 that it would leave U.S. interest rates low through mid-2013.

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“We think [low interest rates will be] a big headwind for earnings and returns on equity for at least the next few years when you essentially have zero percent interest rates at the short end of the curve and the long end continues to flatten,” said Jay Gelb, managing director and senior equity analyst, Barclays Capital, who follows the non-life and life insurance industries.

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“Clearly, low interest rates are going to hurt earnings and it is going to push the need for more stringent underwriting,” said Matthew Mosher, a senior vice president at A.M. Best Company, an independent insurance information and rating service provider.��

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The P/C insurance industry investment income crunch, both experts noted, came amid a year when P/C insurers incurred $32.6 billion in direct insured losses between January and September 2011 as claims arising from the deadly tornadoes in Alabama (April) and Missouri (May) were followed by Hurricane Irene and Tropical Storm Lee in late summer. Both windstorms struck multiple states on the East Coast.

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“The Joplin tornado will be known as the largest insurance event in Missouri history,” said John Huff, director of the Missouri Department of ̽����ѡ and member of the federal government’s Financial Stability Oversight Council, referring to the natural disaster which struck that community, killing 160 people on May 22, 2011. Huff reported that private-sector insurers had already paid out $1.3 billion in Joplin-related claims, and said the final claims payout figure could be as high as $1.9 billion.

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Eli Lehrer, vice president of the Heartland Institute, was asked by Moderator Dr. David Sampson, president and CEO of Property Casualty Insurers Association of America, about the Heartland Institute’s latest annual report on the condition of insurance regulation in the U.S. Released in July 2011, the document examines each state’s insurance regulatory system and assigns all 50 of them a score and letter grade based on two primary criteria: are consumers free to choose the P/C insurance products that they want?; and are insurers free to provide P/C products to consumers?

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“Things [in the U.S. regulatory system], on average, are getting slightly better from a free market perspective,” Lehrer said, singling out Massachusetts and North Carolina as states where the regulatory system has improved in recent years. “The states that were the very worst when we started the Heartland’s regulatory report card have, if anything, gotten worse,” Lehrer added, specifically citing Florida and Texas as two states that have shown little improvement over time and consistently rank among the least effective insurance regulatory systems in the U.S.��

The Property/Casualty ̽����ѡ Joint Industry Forum was created to provide leaders from the widest spectrum of the industry with an opportunity to meet with each other in discussion of topics of general interest. Participants included nearly 250 representatives from property and casualty insurance and reinsurance companies and organizations.

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The sponsoring organizations of the Forum represent a wide spectrum of insurance interests and audiences. They include: ACORD, American ̽����ѡ Association, the Association of Bermuda Insurers and Reinsurers, The Geneva Association, ̽����ѡ Institute for Business & Home Safety, ̽����ѡ Information Institute, ̽����ѡ Institute for Highway Safety, International ̽����ѡ Society, ISO, National Association of Mutual ̽����ѡ Companies, National Council on Compensation ̽����ѡ, National ̽����ѡ Crime Bureau, Property Casualty Insurers Association of America, Property Loss Research Bureau, Reinsurance Association of America and The Institutes.

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