Insurance costs for commercial fleets are projected to increase as much as 20% this year as insurers continue to suffer from poor financial results and heightened fears about terrorist attacks.
At the Society of Insurance Research's annual meeting, insurance industry executives warned that costs must rise to stave off the higher price of doing business in the post-September 11 environment. Mark Puccia, a managing director at Standard & Poor's, said that commercial insurance prices rose 20% to 25% in 2002 and might rise another 15% to 20% in 2003.
Brad Kading, an executive with the Reinsurance Association of America, said that the terrorist attacks on the United States alone cost reinsurers $30 billion. He added that despite capital inflows in 2002, the amount of capital reinsurers had on hand actually fell as a consequence of poor underwriting results, losses on investments, and the need to replenish reserves.
Myron Picoult, an adviser to insurance firm Lazard Freres & Co, noted that even with several years of rate increases, the industry's recovery is proving very difficult as a result of poorly underwritten and badly priced risks already on the books.