Property and Casualty
Insurance Industry
By: Zack Matthies
Industry Life Cycle
Cyclical?
Growth or Consolidation?
Interest Rates
Herfindahl Index
*from a report by J. David Cummins (of the University of Pennsylvania) and Xiaoying Xie (of California State University
at Fullerton)
*Note – The benchmark level for a moderately
concentrated market is between 1,000 and 1,800 and
highly concentrated to be greater than 1,800
P/C Product Line Distribution
(in percent, by net premiums written)
2%
2%
5%
24% 7%
Reinsurance
Accident and Health
11% Commerical Auto
Liability
Commercial Multiple
Peril
Workers Compensation
Homeowners
Private Passenger Auto
12% Physical Damage
Private Passenger Auto
Liability
22% Other
15%
Strengths and Weaknesses
Strength Weakness
Some Government Difficult to correctly
Support estimate potential
Consumers have high losses
demand for Decreasing Level of
differentiated types of Government support
insurance
Opportunities and Threats
Opportunities Threats
Relatively Few Natural Disasters
Barriers to Entry Terrorist Attacks
High Competition Claims Still Pending
Excess Underwriting in Court
Capacity
Unique Accounting and Ratios
SAP Accounting opposed to GAAP
Net Premiums Written to Surplus
(net written premiums/policy holder surplus)
Combined Ratio
(loss ratio + expense ratio + dividend ratio)
Sources
Cummins, J. D., and Xie Xiaoying, comps. EFFICIENCY AND SCALE
ECONOMIES. 20 Aug. 2005. University of Pennsylvania, University
of California At Fullerton. 10 Oct. 2007
.
Standard and Poors Industry Surveys. Standard and Poors. Standard
and Poors, 2007. 1-28.