Insurers Saw Record Gains in Year of Catastrophic Loss - Los Angeles Times

Insurers Saw Record Gains in Year of Catastrophic Loss - Los Angeles Times: "They say the profits are a fluke, but the industry has worked to shift risk to clients and the public.
By Peter G. Gosselin, Times Staff Writer
April 5, 2006

The companies that provide Americans with their homeowners and auto insurance made a record $44.8-billion profit last year even after accounting for the claims of policyholders wiped out by Hurricane Katrina and the other big storms of 2005, according to the firms' filings with state regulators.

Top executives described the profit — an 18.7% increase over the previous year — as a fluke, the product of gains in other lines of insurance besides homeowners and a very good year for their investments.

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They said that even with the increase, insurers face deep problems that can be fixed only by substantial premium hikes, a scaling back of commitments by several firms to the most disaster-prone portions of the country and, according to some, a greatly expanded role for the state and federal governments in insuring individuals against the largest of catastrophes.

'Unless insurers can get relief, you're going to see a pullback by the private industry,' warned Robert P. Hartwig, chief economist of the industry-funded Insurance Information Institute.

'We're not being good stewards of our investors' capital or our policyholders' surplus if we keep doing business where we can't make money.'
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