The Financial Crisis, No-Fault Insurance and the

Future of the P/C Insurance Industry

New York Insurance AssociationAlbany, NY

November 5, 2009

Download at: www.iii.org/Presentations/NYIA-110509/

Robert P. Hartwig, Ph.D., CPCU, President & EconomistInsurance Information Institute 110 William Street New York, NY 10038

Tel: (212) 346-5520 Fax: (212) 732-1916 bobh@iii.org www.iii.org

THE ECONOMIC STORM

What the Financial Crisis and Recession Mean for the Industry’s

Exposure Base, Growth, Profitability and Investments

4

3.7

%

0.8

% 1.6

% 2.5

% 3.6

%

3.1

%

2.9

%

0.1

%

4.8

%

4.8

%

-0.7

%

1.5

%

-2.7

%

3.5

%

2.4

%

2.6

%

2.7

%

2.8

%

2.9

%

-0.7

%

-6.4%

-5.4%

-0.2%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

   2

00

0   

   2

00

1   

   2

00

2   

   2

00

3   

   2

00

4   

   2

00

5   

   2

00

6   

07

:1Q

07

:2Q

07

:3Q

07

:4Q

08

:1Q

08

:2Q

08

:3Q

08

:4Q

09

:1Q

09

:2Q

09

:3Q

09

:4Q

10

:1Q

10

:2Q

10

:3Q

10

:4Q

Real GDP Growth*

*Blue bars are Estimates/Forecasts from Blue Chip Economic Indicators.Source: US Department of Commerce, Blue Economic Indicators 10/09; Insurance Information Institute.

Recession began in December 2007. Economic toll of credit crunch, housing slump, labor market contraction has been severe but recovery is in sight

The Q1:2009 decline was the steepest since the

Q1:1982 drop of 6.4%

Personal and commercial lines

exposure base have been hit

hard and will be slow to come

back

5

Length of U.S. Business Cycles, 1929-Present*

43

138 11 10 8 10 11

166

168 8

19

50

80

3745

39

24

106

36

58

12

92

120

73

0

10

20

30

40

50

60

70

80

90

100

110

120

Aug.1929

May1937

Feb.1945

Nov.1948

July1953

Aug.1957

Apr.1960

Dec.1969

Nov.1973

Jan.1980

Jul.1981

Jul.1990

Mar.2001

Dec.2007

Contraction Expansion Following

* Through June 2009 (likely the “official end” of recession) **Post-WW II period through end of most recent expansion.

Sources: National Bureau of Economic Research; Insurance Information Institute.

Duration (Months)

Month Recession Started

Average Duration** Recession = 10.4 MonthsExpansion = 60.5 Months

Length of expansions

greatly exceeds

contractions

6

5.2%

-0.9

%-7

.4%

-6.5

%-1

.5%

1.8%

4.3%

18.6

%20

.3%

5.8%

0.3%

-1.6

%-1

.0%

-1.8

%-1

.0%

3.1%

1.1%

0.8%

0.4%

0.6%

-0.4

%-0

.3%

1.6%

5.6%

13.7

%7.

7%1.

2%-2

.9% -0

.5%

-3.8

%-4

.4%

-4.5

%

-10%

-5%

0%

5%

10%

15%

20%

25%7

87

98

08

18

28

38

48

58

68

78

88

99

09

19

29

39

49

59

69

79

89

90

00

10

20

30

40

50

60

70

80

9

Rea

l N

WP

Gro

wth

-4%

-2%

0%

2%

4%

6%

8%

Rea

l G

DP

Gro

wth

Real NWP Growth Real GDP

Real GDP Growth vs. Real P/C Premium Growth: Modest Association

P/C insurance industry’s growth is influenced modestly by growth

in the overall economy

Sources: A.M. Best, US Bureau of Economic Analysis, Blue Chip Economic Indicators, 10/09; Insurance Information Inst.

NY Direct Written Premiums (DWP), 1999-2008

$32.

0

$33.

4

$34.

8

$35.

2

$34.

7

$33.

4

$22.

7

$25.

4 $29.

7

$21.

8

$0

$5

$10

$15

$20

$25

$30

$35

$40

99 00 01 02 03 04 05 06 07 08

Dir

ect W

ritt

en P

rem

ium

($ B

)

Source: NAIC Annual Statement Database, via Highline Data LLC.

Premium volume in NY state is shrinking due to the soft

commercial insurance market and weak economy

New York PIPInsurance Update:

Is New York’s No-Fault Crisis Returning?

9

Summary of Findings: New York State’s No-Fault Auto Insurance Problem

No-Fault (PIP) Costs Are Surging

• New York’s no-fault (PIP) average claims costs—at $8,748 per claim—are the second highest in the US (as of the 2nd quarter of 2009)

• The average cost per no-fault claim in New York is more than double (111%) that of the US median ($4,152)

• The average cost of a no-fault claim has soared $3,133 or 56% from $5,615 at the end of 2004 to $8,748 in the second quarter of 2009

• No-Fault claim costs as of Q2 of 2009 are the second highest in NY history, just 5% short of their all-time high of $9,235 in the 1st quarter of 2002

NY PIP UPDATE

Is New York’s No-Fault System Out of Control—

Again?

15

Average PIP (No-Fault) Claim Cost as of 2009:Q2

$3,3

74$2

,913

$2,8

49$2

,834

$2,3

30$1

,869

$1,7

36$1

,552

$668

$649

$604

$544

$539

$539

$5,1

37$6,9

91

$3,8

63$4

,152

$4,5

99$4

,955$5

,916

$8,7

48

$7,2

40$7

,193

$17,

757

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

NJ NY FL MN DE DC KY HI ND PA WA OR TX MD KS SC UT MA MI MN AZ AL SC CO LA

Avg

. PIP

Cla

im S

ever

ity

Average No-Fault (PIP) claim costs in NY are the second

highest in the US and are more than double (111%) higher than

the median cost of $4,152

Sources: Insurance Information Institute based on ISO Fast Track data.

16

NY PIP Claim Frequency & Severity, (2000:04 – 2009:02)

$8,2

71$8

,327

$7,8

88$7

,507

$8,2

34$9

,235

$8,7

27$8

,577

$7,7

73$7

,311

$6,9

58

$6,1

56

$5,8

20$5

,991

$5,6

15$6

,094

$5,9

14 $6,2

50$6

,269 $6

,530

$6,6

06$7

,063 $7

,323

$7,3

78$7

,297 $7

,670

$7,7

40$8

,443

$8,1

77 $8,5

07$8

,025

$8,5

62$8

,748

$6,0

52

$6,8

70

$5,000

$5,500

$6,000

$6,500

$7,000

$7,500

$8,000

$8,500

$9,000

$9,500

0:0

41

:01

1:0

21

:03

1:0

42

:01

2:0

22

:03

2:0

43

:01

3:0

23

:03

3:0

44

:01

4:0

24

:03

4:0

45

:01

5:0

25

:03

5:0

46

:01

6:0

26

:03

6:0

47

:01

7:0

27

:03

7:0

48

:01

8:0

28

:03

8:0

49

:01

9:0

2

Avg

. Cla

im C

ost

1.4%

1.5%

1.6%

1.7%

1.8%

1.9%

2.0%

2.1%

2.2%

2.3%

2.4%

Claim

Frequency

Avg. Claim Severity

Frequency

Sources: Insurance Information Institute based on ISO Fast Track data.

NY PIP Fraud is Back

Average cost per PIP claim (severity) fell 39% between

02:Q1 and 04:Q4 but has since soared by 56% through 09:Q2

Freq. down 32% since 2000:04

PIP severity is now at its second highest

level in history: $8,748 per claim

18

New York Insurance Fraud Reports, 1995 – 2008

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008*

Auto CollisionDamage

Auto Theft

No-Fault Auto

Source: New York Department of Insurance, Insurance Frauds Bureau Annual Report; Insurance Info. Institute.

Number of No-Fault related fraud reports remains high

and is beginning to rise again

No-fault fraud reports fell 35%

between 2003 and 2006, but are now rising (up 22% in 2008 over 2006)

22

What Needs to be Done?

Solutions to Reduce Costs in NY’s No-Fault System• Institute Medical Protocols/Utilization Reviews

Guidelines for medical care for specific auto accident-related injuries to reduce cost of over-treatment and unnecessary treatment

Note: NY’s no-fault system may be the last major payor for medical treatments that does not mandate protocols or utilization reviews. This virtual “blank check” drives up system costs dramatically.

• Require Disputes Be Resolved via ArbitrationAvoids costs and uncertainty of trial for all partiesExpedites resolution of claimUnclogs overburdened court system

• Increase Penalties for RunnersUpgrading to felony from misdemeanor as deterrent

23

What Needs to be Done? (cont’d)

Solutions to Reduce Costs in NY’s No-Fault System• Streamline Process for Adjudicating No-Fault Claims

For small no-fault disputes (under $5,000), permit parties to submit proof based on sworn affidavit from their doctor rather requiring that the doctor appear in person

Note: New York City courts are inundated with no-fault cases (approx. 1/3 of cases are no-fault and in 2009 courts were setting 2011 dates to hear cases)

• Implement Fair Burden of Proof Requirements Presently, health service providers are required only to submit proof that a bill was

received by the insurer to establish entitlement to receive amounts billed (irrespective of suspicions of fraud/abuse)

Insurers burden is much higher—required to produce both a witness to testify under oath that the claim was handled in accordance with regulations and a medical expert to testify on the “lack of medical necessity”

Solution: Require that in order to establish the right to no-fault benefits, the plaintiff be required to produce a witness with personal knowledge of the facts alleged in a complaint. Furthermore, there should be no presumption medical necessity based on documents submitted by non-medical plaintiffs and/or witnesses who do not have personal knowledge of such necessity

Regional Differences Will Significantly

Impact P/C Markets Recovery in Some Areas Will Begin Years Ahead of Others & Speed of Recovery Will Differ By Orders of

Magnitude

25

State Economic Growth Varied Tremendously in 2008

Eastern US growing more slowly than Plains,

Mountains

26

Fastest Growing States in 2008: Plains, Mountain States Lead

7.3%

4.4%

3.5%2.9%

2.0%2.1%2.5%

2.7%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

ND WY SD CO OK WV IA TX, MN,NM, WA

Natural resource and agricultural states have done

better than most others recently, helping insurance

exposure in those areas

Source: US Bureau of Economic Analysis; Insurance Information Institute.

PercentReal State GDP Growth

Labor Market Trends

Fast & Furious: Massive Job Losses Sap the Economy and Personal &

Commercial Lines Exposure

29

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Ja

n-0

0

Ja

n-0

1

Ja

n-0

2

Ja

n-0

3

Ja

n-0

4

Ja

n-0

5

Ja

n-0

6

Ja

n-0

7

Ja

n-0

8

Ja

n-0

9

January 2000 through September 2009*

Unemployment will likely peak near 10 % during this cycle, impacting payroll

sensitive p/c and l/h exposures

Source: US Bureau of Labor Statistics; Insurance Information Institute.

Sept. 2009 unemployment was 9.8%, up 0.3% from July but still near its

highest level since August 1983

Unemployment Rate:On the Rise

Average unemployment rate 2000-07 was 5.0%

Previous Peak: 6.3% in June 2003

Trough: 4.4% in March 2007

Sep

-09

Unemployment Rates by State, September 2009: Highest 25 States*

10.5

9.8

9.610

.1

10.1

10.5

9.3

9.1

9.2

8.89.

3

8.9

8.99.

5

11.4

11.6

10.7

10.8

10.9

11.011

.5

13.3

13.0

12.2

15.3

0

2

4

6

8

10

12

14

16

MI NV RI CA SC OR DC FL KY NC AL IL TN OH GA NJ IN MO WA MA MS AZ NY WV ID

Une

mpl

oym

ent R

ate

(%)

*Provisional figures for September 2009, seasonally adjusted.

Sources: US Bureau of Labor Statistics; Insurance Information Institute.

The unemployment rate has been rising across the country, but some states are doing much

better than others.

NY’s unemployment was 8.9% in September,

0.9 pts. below the US rate of 9.8%

6.8

6.7

6.7

6.7

6.76.97.

27.

2

4.8

4.9

6.2

7.07.1

4.2

6.7

8.2

8.3

7.27.3

7.47.

78.38.

5

8.4

8.48.

8

0

2

4

6

8

10

PA ME AK CT WI DE TX NM LA MN HI MD NH AR CO KS WY IA OK VT MT VA UT NE SD ND

Une

mpl

oym

ent R

ate

(%)

Unemployment Rates By State, September 2009: Lowest 25 States*

The unemployment rate has been rising across the country, but some states are doing much

better than others.

*Provisional figures for September 2009, seasonally adjusted.

Sources: US Bureau of Labor Statistics; Insurance Information Institute.

32

U.S. Unemployment Rate,(2007:Q1 to 2010:Q4F)*

4.5%

4.5% 4.6% 4.

8% 4.9%

5.4%

6.1%

6.9%

8.1%

9.3% 9.

6% 10.0

%

10.1

%

10.0

%

9.8%

9.6%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%

10.0%

10.5%

11.0%

07:Q1 07:Q2 07:Q3 07:Q4 08:Q1 08:Q2 08:Q3 08:Q4 09:Q1 09:Q2 09:Q3 09:Q4 10:Q1 10:Q2 10:Q3 10:Q4

* Blue bars are actual; Yellow bars are forecasts

Sources: US Bureau of Labor Statistics; Blue Chip Economic Indicators (10/09); Insurance Info. Inst.

Rising unemployment is eroding payrolls and

workers comp’s exposure base.

Unemployment is expected to peak above

10% in early 2010.

34

Labor Underutilization: Broader than Just

Unemployment

11.2%

16.4% 16.5% 16.3%17.0%16.8%

10%

11%

12%

13%

14%

15%

16%

17%

18%

Sep-08 May-09 Jun-09 Jul-09 Aug-09 Sep-09

Marginally attached and unemployed persons account for 17% of the labor force in Sept. 2009 (1 out 6 people).

Unemployment rate alone was 9.8%. Underutilization shows a broader impact on WC and other commercial exposures.

NOTE: Marginally attached workers are persons who currently are neither working nor looking for work but indicate that they want and are availableFor a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached, have given a job-marketrelated reason for not looking currently for a job. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.

Source: US Bureau of Labor Statistics; Insurance Information Institute.

Percent % of Labor Force

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09*

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45Wage & SalaryDisbursementsWC NPW

*Average Wage and Salary data as of 7/1/2009.Source: US Bureau of Economic Analysis; Federal Reserve Bank of St. Louis at http://research.stlouisfed.org/fred2/series/WASCUR; I.I.I. Fact Books

Wage & Salary Disbursements (Payroll Base) vs. Workers Comp

Net Written Premiums

7/90-3/91

Shaded areas indicate recessions

3/01-11/01

Wage & Salary Disbursement (Private Employment) vs. WC NWP$ Billions $ Billions

12/07-?

Weakening payrolls have

eroded $2B+ in workers comp

premiums

Crisis-Driven Exposure

DriversEconomic Obstacles

to Growth in P/C Insurance

42

New Private Housing Starts,1990-2010F (Millions of Units)

2.07

1.80

1.36

0.90

0.58

0.81

1.48

1.351.

46

1.29

1.20

1.01

1.19

1.47

1.62 1.64

1.57 1.60 1.

71

1.85 1.

960.50.60.70.80.91.01.11.21.31.41.51.61.71.81.92.02.1

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09F 10F

Exposure growth due to home construction forecast for HO insurers is dim for 2009

with some improvement in 2010.

Impacts also for comml. insurers with construction risk exposure

New home starts plunged 34%

from 2005-2007; Drop through 2009 is 72% (est.)—a net

annual decline of 1.49 million

units, lowest since record

began in 1959

I.I.I. estimates that each incremental 100,000 decline in housing starts costs

home insurers $87.5 million in new exposure (gross premium). The net

exposure loss in 2009 vs. 2005 is estimated at about $1.3 billion.

Source: US Department of Commerce; Blue Chip Economic Indicators (10/09); Insurance Information Inst.

43

16.916.916.6

17.117.5

17.817.4

16.516.1

13.1

10.4

11.8

9

10

11

12

13

14

15

16

17

18

19

99 00 01 02 03 04 05 06 07 08 09F 10F

Weak economy, credit crunch are hurting auto sales; Gas prices

have been a factor too.

New auto/light truck sales are expected to experience a net drop of 6.5 million units annually by 2009 compared with 2005, a decline of 37%

and the lowest level since the late 1960s

Impacts of falling auto sales will have a less pronounced effect on auto insurance exposure growth

than problems in the housing market will on home insurers

Auto/Light Truck Sales,1999-2010F (Millions of Units)

Source: US Department of Commerce; Blue Chip Economic Indicators (10/09); Insurance Information Inst.

“Cash for Clunkers” should generate $225M - $375M in net new personal auto premiums

45

Private Sector Business Starts,1993:Q2-2008:Q4*

175

186

174

180

186

192

188

187 18

918

6 190 19

419

119

9 204

202

195

196

196

206

206

201

192

198

206

206

203

211

205

212

200 20

520

420

419

720

320

9

203

192

192

193

201 20

420

221

0 212

209

216 22

0 223

220

220

210

221

212

204

218

210

209

195

187 18

9

201

150

160

170

180

190

200

210

220

230

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08

Business starts are down 15% in the current downturn, holding back most types of commercial

insurance exposure

*Latest available as of Oct. 2009.Source: Bureau of Labor Statistics: http://www.bls.gov/news.release/cewbd.t07.htm

Thousands189,000 business starts

were recorded 2008:Q4, the lowest

level since 1995

Year-Over-Year Change in Quarterly U.S. State Tax Revenues, Inflation Adjusted

2.4% 4.

7% 5.6%

9.9%

9.5%

4.4%

1.8%

0.4%

-1.3

%-1

.7%

-3.0

%-7

.6%

-10.

7%0.

0% 1.6%

-0.6

%0.

1%4.

0% 4.7% 5.

7%8.

2%3.

4%6.

0% 7.0%

12.4

%6.

6%4.

2%3.

7%6.

3%2.

6%1.

3% 1.9%

2.3%

0.4% 0.8%

0.4%

3.0%

0.2%

-5.8

%

-17.

8%-1

3.4%

2.4%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

1Q99

2Q99

3Q99

4Q99

1Q00

2Q00

3Q00

4Q00

1Q01

2Q01

3Q01

4Q01

1Q02

2Q02

3Q02

4Q02

1Q03

2Q03

3Q03

4Q03

1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

3Q05

4Q05

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

Source: U.S. Census Bureau; Nelson A. Rockefeller Institute of Government: http://www.rockinst.org/pdf/government_finance/state_revenue_report/2009-10-15-SRR_77.pdf

Nationwide, state-tax collections for fiscal year 2009 declined by a record $63 billion, or 8.2 percent from the previous year. That loss

is roughly twice the amount states gained in fiscal relief from

the federal stimulus package.

States revenues were down 17.8% in Q2 2009, the second consecutive quarter of record revenue decline. This will impact public infrastructure spending significantly.

GREEN SHOOTS

Is the Recession Nearing an End?

65

Hopeful Signs that theEconomic Recovery Is Underway

•  Recession Appears to be Bottoming Out, Freefall Has Ended• GDP shrinkage has ended; Economy is expanding

• Pace of job losses is slowing

• Major stock market indices well off record lows, anticipating recovery

• Some signs of retail sales stabilization are evident

• Financial Sector is Stabilizing• Banks are reporting quarterly profits

• Many banks expanding lending to very credit worthy people & businesses

• Housing Sector Seems To Be Bottoming Out• Home are much more affordable (attracting buyers)

• Mortgage rates are still low relative to pre-crisis levels (attracting buyers)

• Freefall in housing starts and existing home sales is ending in many areas

• Inflation & Energy Prices Are Under Control

• Consumer & Business Debt Loads Are Shrinking

Source: Ins. Info. Inst.

66

11 Industries for the Next 10 Years: Insurance Solutions Needed

GovernmentEducation

Health CareEnergy (Traditional)Alternative Energy

AgricultureNatural Resources

EnvironmentalTechnology

Light ManufacturingExport Oriented Industries

Inflation Trends: Concerns Over

Stimulus Spending and Monetary Policy

Mounting Pressure on Claim Cost Severities?

68

Annual Inflation Rates(CPI-U, %), 1990-2010F

4.9 5.1

3.0 3.2

2.6

1.51.9

3.3 3.4

1.3

2.5 2.3

3.0

3.8

2.8

3.8

(0.5)

1.9

2.82.92.4

(1.0)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09F10F

Sources: US Bureau of Labor Statistics; Blue Chip Economic Indicators, Oct. 10, 2009 (forecasts).

Inflation peaked at 5.6% in August 2008 on high energy and commodity crisis. The

recession and the collapse of the commodity bubble have produced temporary deflation.

There is so much slack in the US economy that inflation should not be a concern through 2010, but depreciation of dollar is concern longer run.

71

Top Concerns/Risks for Insurers if Inflation is Reignited

CONCERNS: The Federal Reserve Has Flooded Financial System with Cash (Turned on the Printing Presses), the Federal Govt. Has Approved a $787B Stimulus and the Deficit is Expected to Mushroom to $1.8 Trillion. All Are Potentially Inflationary. What are the potential impacts for insurers? What can/should insurers do to protect themselves from the risks of inflation?

KEY RISKS FROM SUSTAINED/ACCELERATING INFLATION• Rising Claim Severities

Cost of claims settlement rises across the board (property and liability)• Rate Inadequacy

Rates inadequate due to low trend assumptions arising from use of historical data • Reserve Inadequacy

Reserves may develop adversely and become inadequate (deficient)• Burn Through on Retentions

Retentions, deductibles burned through more quickly• Reinsurance Penetration/Exhaustion

Higher costsrisks burn through their retentions more quickly, tapping into re-insurance more quickly and potential exhausting their reinsurance more quickly

Source: Ins. Info. Inst.

Key Threats Facing Insurers Amid

Financial Crisis

Challenges for theNext 5-8 Years

75

Important Issues & Threats Facing Insurers: 2009 - 2015

Source: Insurance Information Inst.

3. Long-Term Reduction in Investment Earnings Low interest rates, risk aversion toward equities and many

categories of fixed income securities lock in a multi-year trajectory toward ever lower investment gains

Fed actions in Treasury markets keep yields low Many insurers have not adjusted to this new investment

paradigm of a sustained period of low investment gains Regulators will not readily accept it; Many will reject it Implication 1: Industry must be prepared to operate in

environment with investment earnings accounting for a smaller fraction of profits

Implication 2: Implies underwriting discipline of a magnitude not witnessed in this industry in more than 30 years. Yet to manifest itself.

Lessons from the period 1920-1975 need to be relearned

76Source: Insurance Information Inst.

4. Regulatory Overreach Principle danger is that P/C insurers get swept into

vast federal regulatory overhaul and subjected to inappropriate, duplicative and costly regulation (Dual Regulation)

Strong arguments for Optional Federal Charter, but…

Pushing for major change is not without risk in the current highly charged political environment

Dangers exist if feds get their nose under the tent Status Quo is viewed as unacceptable by all Disunity within the insurance industry Insurance & systemic risk—Who is important? Impact of regulatory changes will be felt for decades Bottom Line: Regulatory outcome is uncertain and

risk of adverse outcome exists

Important Issues & Threats Facing Insurers: 2009 – 2???

77

Health Insurance Reform Debate—Potential Spillover Impacts on P/C Insurers

• 24-Hour Coverage Proposal Would roll WC and med components of auto into natl. health care plan

• Rollback of McCarran-Ferguson Act Would repeal or restrict for health and medical malpractice insurers Slippery slope—Med Mal is a p/c line; Congress will not hesitate to breach M-F for other p/c lines in the

future to show its ire over an issue (e.g., after major cat)

• Exclusion of Med Mal Reform from Health Care Bill Shows powerful influence of trial bar with Congress/Administration

• FTC granted authority to conduct studies “related to insurance” –All Lines!• Reporting of Claims• Adjustments to Medicare Fee Schedules• Patient “Bill of Rights” or Vague Standards of Care• Cost Shifting into WC, Auto from Health System

WC/Auto Medical: more lucrative from provider perspective

• “Windfall” Profit Taxes? Additional Premium Taxes?• Executive Compensation Restrictions?• Public “Option” in P/C Lines—Nat Cat/Wind?• Perception that Feds Regulate Insurance Industry Taking Root

78Source: Insurance Information Inst.

5. Emerging Tort Threat No tort reform (or protection of recent reforms) is

forthcoming from the current Congress or Administration

Erosion of recent reforms is a certainty (already happening)

Innumerable legislative initiatives will create opportunities to undermine existing reforms and develop new theories and channels of liability

Torts twice the overall rate of inflation Influence personal and commercial lines, esp. auto liab. Historically extremely costly to p/c insurance industry Leads to reserve deficiency, rate pressure Bottom Line: Tort “crisis” is on the horizon and will be

recognized as such by 2012-2014

Important Issues & Threats Facing Insurers: 2009 -2015

Shifting Legal Liability & Tort

Environment

Is the Tort PendulumSwinging Against Insurers?

Over the Last Three Decades, Total Tort Costs* as a % of GDP Appear Somewhat Cyclical

$0

$50

$100

$150

$200

$250

$300

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

E

20

10

E

Tor

t S

yste

m C

osts

1.50%

1.75%

2.00%

2.25%

2.50%

Tor

t C

osts

as

% o

f G

DP

Tort Sytem Costs Tort Costs as % of GDP

Sources: Tillinghast-Towers Perrin, 2008 Update on US Tort Cost Trends, Appendix 1A; I.I.I. calculations/estimates for 2009 and 2010

Billions

*Excludes the tobacco settlement, medical malpractice

2009-2010 Growth in Tort Costs as % of GDP is due in part to shrinking GDP

FINANCIAL STRENGTH &

RATINGS Industry Has Weathered

the Storms Well

83

P/C Insurer Impairments,1969-2008

815

12

711

934

913

12

19

916

14

13

36

49

31 3

450

48

55

60

58

41

29

16

12

31

18 19

49 50

47

35

18

14 15

75

0

10

20

30

40

50

60

70

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

The number of impairments varies significantly over the p/c insurance cycle,

with peaks occurring well into hard markets

Source: A.M. Best; Insurance Information Institute

86

Summary of A.M. Best’s P/C Insurer Ratings Actions in 2008*

Under Review, 63 , 4.3%

Upgraded, 59 , 4.0%

Initial, 41 , 2.8%

Other, 59 , 4.0%

Affirm, 1,183 , 81.0%

Downgraded, 55 , 3.8%

*Through December 19.Source: A.M. Best.

86

Despite financial market turmoil, high cat losses and a soft market in 2008, 81% of ratings actions by A.M. Best

were affirmations; just 3.8% were downgrades

and 4.0% upgrades

P/C insurance is by design a resilient in business. The dual threat of financial

disasters and catastrophic losses are

anticipated in the industry’s risk

management strategy.

88

Reasons for US P/C Insurer Impairments, 1969-2008

Source: A.M. Best: 1969-2008 Impairment Review, Special Report, Apr. 6, 2008

Deficient loss reserves and inadequate

pricing are the leading cause of

insurer impairments,

underscoring the importance of

discipline. Investment

catastrophe losses play a much smaller role.

Reinsurance Failure3.7%

Rapid Growth14.3%

Misc.9.1%

Affiliate Impairment

7.9%

Sig. Change in Business

4.2%

Deficient Loss

Reserves/In-adequate Pricing38.1%

Investment Problems

7.0%

Alleged Fraud8.1%

Catastrophe Losses7.6%

Critical Differences Between P/C

Insurers and BanksSuperior Risk Management Model

& Low Leverage Makea Big Difference

90

How Insurance Industry Stability Has Benefitted Consumers

BOTTOM LINE:• Insurance Markets—Unlike Banking—Are Operating

Normally• The Basic Function of Insurance—the Orderly Transfer

of Risk from Client to Insurer—Continues Uninterrupted• This Means that Insurers Continue to:

Pay claims (whereas 123 banks have gone under as of 10/2/09) The Promise is Being Fulfilled

Renew existing policies (banks are reducing and eliminating lines of credit) Write new policies (banks are turning away people and businesses who

want or need to borrow) Develop new products (banks are scaling back the products they offer) Compete Intensively (banks are consolidating, reducing consumer choice)

Source: Insurance Information Institute90

91

• Emphasis on Underwriting Matching of risk to price (via experience and modeling) Limiting of potential loss exposure Some banks sought to maximize volume and fees and disregarded risk

• Strong Relationship Between Underwriting and Risk Bearing Insurers always maintain a stake in the business they underwrite, keeping “skin in the game”

at all times Banks and investment banks package up and securitize, severing the link between risk

underwriting and risk bearing, with (predictably) disastrous consequences—straightforward moral hazard problem from Econ 101

• Low Leverage Insurers do not rely on borrowed money to underwrite insurance or pay claimsThere is no

credit or liquidity crisis in the insurance industry• Conservative Investment Philosophy

High quality portfolio that is relatively less volatile and more liquid• Comprehensive Regulation of Insurance Operations

The business of insurance remained comprehensively regulated whereas a separate banking system had evolved largely outside the auspices and understanding of regulators (e.g., hedge funds, private equity, complex securitized instruments, credit derivatives—CDS’s)

• Greater Transparency Insurance companies are an open book to regulators and the public

Source: Insurance Information Institute91

Reasons Why P/C Insurers Have Fewer Problems Than Banks:

A Superior Risk Management Model

P/C INSURANCE FINANCIAL

PERFORMANCE

A Resilient Industry in Challenging Times

Profitability

Historically Volatile

97

P/C Net Income After Taxes1991-2009:H1 ($ Millions)*

$14,

178

$5,8

40

$19,

316

$10,

870

$20,

598

$24,

404 $3

6,81

9

$30,

773

$21,

865

$3,0

46

$30,

029

$62,

496

$2,3

79

$5,7

57

-$6,970

$65,

777

$44,

155

$20,

559 $3

8,50

1

-$10,000

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,00091 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08

09:H

1

*ROE figures are GAAP; 1Return on avg. surplus. Excluding Mortgage & Financial Guaranty insurers yields an 4.5% ROAS for 2008 and 2.2%. 2009:Q1 net income was $10.0 billion excl. M&FG.Sources: A.M. Best, ISO, Insurance Information Inst.

2005 ROE= 9.4%2006 ROE = 12.2%2007 ROAS1 = 12.4%2008 ROAS = 0.5%*2009:H1 ROAS = 2.5%*

Insurer profits peaked in 2006 and 2007, but fell 96.2% during the economic

crisis in 2008

97

98

-5%

0%

5%

10%

15%

20%

87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 0809:H1

US P/C Insurers All US Industries

ROE: P/C vs. All Industries 1987–2009: H1*

*Excludes Mortgage & Financial Guarantee in 2008 and 2009Sources: ISO, Fortune; Insurance Information Institute.

Andrew Northridge

Hugo Lowest CAT losses in 15 years

Sept. 11

4 Hurricanes

Katrina, Rita, Wilma

P/C profitability is cyclical and volatile

Financial Crisis*

6.6%3.3%

9.5% 10.0%

5.3%8.6% 8.3%

12.5%

-0.5%

12.5%

6.5%

14.4%

8.8%8.8%

-22.3%

9.2%

13.2%

8.9%

10.9%

4.1%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

98 99 00 01 02 03 04 05 06 07

US NY

Rates of Return on Net Worth for All Lines: US vs. NY, 1998–2007*

Source: NAIC. *Latest available.

Excluding 2001, returns in NY’s p/c insurance

markets have been about average

101

97.5

100.6 100.1 100.7

92.6

99.5101.0

8.9%4.2%

12.7%

14.3% 15.9%

9.6%

4.5%

80

85

90

95

100

105

110

1978 1979 2003 2005 2006 2008* 2009:H1*

Co

mb

ined

Ratio

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Retr

un

on

Eq

uity*

Combined Ratio ROE*

* 2008/9 figures are return on average statutory surplus. Excludes mortgage and financial guarantee insurers.Source: Insurance Information Institute from A.M. Best and ISO data.

A 100 Combined Ratio Isn’t What it Used to Be: 95 is Where It’s At

Combined ratios must me must lower in today’s depressed

investment environment to generate risk

appropriate ROEs

P/C Premium Growth

Primarily Driven by the Industry’s Underwriting Cycle, Not the Economy

103

-6%

-4%-2%

0%

2%4%

6%

8%10%

12%

14%16%

18%

20%22%

24%

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

09:H

1

Sources: A.M. Best (historical and forecast), ISO, Insurance Information Institute

Strength of Recent Hard Marketsby NWP Growth

1975-78 1984-87 2000-03

103

Net written premiums fell 1.0%

in 2007 (first decline since 1943)

by 1.4% in 2008, and 4.2% in H1 2009, the first 3-

year decline since 1930-33

Shaded areas denote “hard

market” periods

104

$651 $6

68 $691 $7

05

$703

$685

$690 $7

26

$786

$875

$830

$841

$817

$820$8

42

$831

$600

$650

$700

$750

$800

$850

$900

$950

94 95 96 97 98 99 00 01 02 03 04 05 05 07* 08* 09*

Average Expenditures on Auto Insurance

*Insurance Information Institute Estimates/ForecastsSource: NAIC, Insurance Information Institute estimates 2007-2009 based on CPI data.

Countrywide auto insurance expenditures increased 2.6% in 2008 and are rising at a

4% pace in 2009

105

0.8

%0

.8%

0.5

%0

.4%

0.3

%0

.3%

0.5

%0

.6%

0.5

%0

.1% 0.5

% 0.9

%1

.1%

1.3

% 1.7

%2

.6%

2.6

%2

.7% 3.0

%3

.1% 3.4

% 3.7

% 4.0

%4

.0% 4.3

%4

.4% 4.7

%4

.4% 4.7

%4

.6%

4.7

%4

.5%

0.2

%

0%

1%

2%

3%

4%

5%

6%

Ja

n-0

7F

eb

-07

Ma

r-0

7A

pr-

07

Ma

y-0

7J

un

-07

Ju

l-0

7A

ug

-S

ep

-07

Oc

t-0

7N

ov

-07

De

c-0

7J

an

-08

Fe

b-0

8M

ar-

08

Ap

r-0

8M

ay

-08

Ju

n-0

8J

ul-

08

Au

g-

Se

p-0

8O

ct-

08

No

v-0

8D

ec

-08

Ja

n-0

9F

eb

-09

Ma

r-0

9A

pr-

09

Ma

y-0

9J

un

-09

Ju

l-0

9A

ug

-S

ep

-09

Monthly Change in Auto Insurance Prices*

*Percentage change from same month in prior year.Source: US Bureau of Labor Statistics

Auto insurance price increases seem to have leveled off

in recent months at about +4.5%

106

$508 $5

36

$593

$668

$729 $7

64 $804

$807

$820

$841

$500

$550

$600

$650

$700

$750

$800

$850

$900

$950

00 01 02 03 04 05 06 07* 08* 09*

Average Premium for Home Insurance Policies**

*Insurance Information Institute Estimates/Forecasts **Excludes state-run insurers.Source: NAIC, Insurance Information Institute estimates 2007-2009 based on CPI data.

Countrywide auto insurance expenditures increased 1.6% in 2008 and are increasing at 2.6% annual rate in 2009

107

Average Commercial Rate Change,All Lines, (1Q:2004 – 3Q:2009)

-3.2

%

-5.9

%

-7.0

%

-9.4

%

-9.7

% -8.2

%

-4.6

% -2.7

%

-3.0

%

-5.3

%

-9.6

%

-11.

3%

-11.

8%

-13.

3% -12.

0%

-13.

5%

-12.

9% -11.

0%

-6.4

% -5.1

%

-4.9

%-5

.8%

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

3Q05

4Q05

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

Source: Council of Insurance Agents & Brokers; Insurance Information Institute

KRW Effect

-0.1

% Magnitude of price declines is now

shrinking. Reflects shrinking capital,

reduced investment gains, deteriorating

underwriting performance, higher cat losses and costlier

reinsurance

Capital/Policyholder Surplus (US)

Shrinkage, but Not Enough to

Trigger Hard Market

113

Policyholder Surplus, 2006:Q4 – 2009:H1

$ Billions

$487.1$496.6

$512.8$521.8

$478.5

$455.6

$437.1

$463.0

$505.0$515.6

$517.9

$380

$400

$420

$440

$460

$480

$500

$520

$540

06:Q4 07:Q1 07:Q2 07:Q3 07:Q4 08:Q1 08:Q2 08:Q3 08:Q4 09:Q1 09:Q2

Source: ISO, AM Best.

Declines Since 2007:Q3 Peak

08:Q2: -$16.6B (-3.2%) 08:Q3: -$43.3B (-8.3%) 08:Q4: -$66.2B (-12.9%) 09:Q1: -$84.7B (-16.2%)

09:Q2: -$58.8B (-11.2%)

Capacity peaked at $521.8 as of 9/30/07

113

114

Ratio of Insured Loss to Surplus for Largest Capital Events Since 1989*

3.3%

9.6%

6.9%

10.9%

16.2%

13.8%

6.2%

0%2%4%6%8%

10%12%14%16%18%

6/3

0/1

98

9H

urr

ica

ne

Hu

go

6/3

0/1

99

2H

urr

ica

ne

An

dre

w

12

/31

/93

No

rth

rid

ge

Ea

rth

qu

ak

e

6/3

0/0

1S

ep

t. 1

1A

tta

ck

s

6/3

0/0

4F

lori

da

Hu

rric

an

es

6/3

0/0

5H

urr

ica

ne

Ka

trin

a

Fin

an

cia

lC

ris

is a

s o

f3

/31

/09

**

*Ratio is for end-of-quarter surplus immediately prior to event. Date shown is end of quarter prior to event. **Date of maximum capital erosion; As of 6/30/09 (latest available) ratio = 11.2%.Source: PCS; Insurance Information Institute.

The financial crisis now ranks as the largest

“capital event” over the past 20+ years

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

NWP % changeSurplus % change

*2009 NWP and Surplus figures are % changes for H1:09 vs H1:08Sources: A.M. Best, ISO, Insurance Information Institute

Historically, Hard Markets Follow When Surplus “Growth” is Negative*

Sharp decline in capacity is a necessary but not sufficient

condition for a true hard market

Investment Performance

Investments are a Principle Source of Declining

Profitability

117

Property/Casualty Insurance Industry Investment Gain:1994- 2009:H11

$ Billions

$35.4

$42.8$47.2

$52.3

$44.4

$36.0

$45.3$48.9

$59.4$55.7

$64.0

$31.4

$12.4

$56.9$51.9

$57.9

$0

$10

$20

$30

$40

$50

$60

1Investment gains consist primarily of interest, stock dividends and realized capital gains and losses. 2006 figure consists of $52.3B net investment income and $3.4B realized investment gain. *2005 figure includes special one-time dividend of $3.2B.Sources: ISO; Insurance Information Institute.

Investment gains fell by 51% in 2008 due to lower yields, poor equity market

conditions. Falling again in 2009.

117

Underwriting Trends

Financial Crisis Does Not Directly Impact Underwriting

Performance: Cycle, Catastrophes Were 2008’s Drivers

123

115.8

107.5

100.198.4

100.8

92.6

99.5101.0

95.7

90

100

110

120

2001 2002 2003 2004 2005 2006 2007 2008 2009:H1*

P/C Insurance Industry Combined Ratio, 2001-2009:H1*

*Excludes Mortgage & Financial Guaranty insurers in 2008. Including M&FG, 2008=105.1, 2009=100.9 Sources: A.M. Best, ISO.

Best combined ratio since 1949

(87.6)

As recently as 2001, insurers paid out nearly $1.16 for every

$1 in earned premiums

Relatively low CAT

losses, reserve releases

Cyclical Deterioration

123

2005 ratio benefited from heavy use of reinsurance which lowered net losses

124

P/C Reserve Development, 1992-2011E

-6.6

-9.8

13.7

9.9

7.3

-6.7

-9.5

-14.

6

-16 -15

-5

23.2

11.7

1

-4.1

-9.9

-2.1

-8.3

-2.6

2.3

($20)

($15)

($10)

($5)

$0

$5

$10

$15

$20

$25

$30

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10E 11E

Pri

or Y

r. R

eser

ve R

elea

se ($

Bill

)

(6)

(4)

(2)

0

2

4

6

8

Impa

ct o

n C

ombi

ned

Rat

io (P

oint

s)

Prior Yr Reserve Development ($ Bill) Impact on Combined Ratio (Points)

.

Note: 2005 reserve development excludes a $6 billion loss portfolio transfer between American Re and Munich Re. Including this transaction, total prior year adverse development in 2005 was $7 billion. The data from 2000 and subsequent years excludes development from financial guaranty and mortgage insurance. Source: Barclay’s Capital; A.M. Best.

2009 off to a stronger start with AIG unit sales and

Bermuda consolidation

$ Value of deal up 20% in 2009,

volume down 12%

125

Calendar Year vs. Accident Year P/C Combined Ratio:1992- 2010E1

115.

7

106.

9

108.

4

106.

4

107.

8 110.

1

115.

9

107.

3

100.

1

98.3 10

0.9

92.4

95.5

105.

1

101.

9

105.

9

115.

7

106.

9

108.

4

106.

4

105.

8

101.

6

105.

6 107.

8 110.

0 112.

3

100.

8

96.6

96.0

100.

6

93.9

97.4

105.

5

105.

7 109.

4

105.

6

101.

6

105.

8

80

85

90

95

100

105

110

115

120

92 93 94 95 96 97 98 99 00 01 02 03 04 05* 06 07 08 09E 10E

Calendar Year Accident YearAccident year results show a

more significant deterioration in underwriting performance.

Calendar year results are helped by reserve releases

125

.

Note: 2005 reserve development excludes a $6 billion loss portfolio transfer between American Re and Munich Re. Including this transaction, total prior year adverse development in 2005 was $7 billion. The data from 2000 and subsequent years excludes development from financial guaranty and mortgage insurance. Source: Barclay’s Capital; A.M. Best.

126

-55-50-45-40-35-30-25-20-15-10-505

101520253035

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09:Q

1

Source: A.M. Best, ISO; Insurance Information Institute * Includes mortgage & finl. guarantee insurers

$ B

illi

ons

Insurers earned a record underwriting profit of $31.7B in 2006 and $19.3B in 2007, the largest ever but only the 2nd and 3rd since 1978. Cumulative underwriting deficit from

1975 through 2008 is $442B.

Underwriting Gain (Loss)1975-2009:H1*

$19.8 Bill underwriting loss in 2008

incl. mort. & FG insurers, -$2.2B in H1:09

126

Large underwriting losses are NOT

sustainable in current investment environment

127

Number of Years With Underwriting Profits by Decade, 1920s –2000s

67

10

8

45

0 0

3

0

2

4

6

8

10

1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s*

Note: Data for 1920 – 1934 based on stock companies only.Sources: Insurance Information Institute research from A.M. Best Data. *2000 through 2008.

Number of Years with Underwriting ProfitsUnderwriting profits were common before the 1980s (40 of the 60 years

before 1980 had combined ratios below 100)—but then they vanished. Not a single underwriting profit was recorded in the 25 years from 1979

through 2003.

127

Catastrophic Loss

Catastrophe Losses Trends Are Trending Adversely

129

U.S. Insured Catastrophe Losses$7

.5$2

.7$4

.7$2

2.9

$5.5 $1

6.9

$8.3

$7.4

$2.6 $1

0.1

$8.3

$4.6

$26.

5$5

.9 $12.

9 $27.

5

$6.7

$26.

0$7

.5$1

00.0

$61.

9

$9.2

$0

$20

$40

$60

$80

$100

$120

89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09*

20??

*Based on PCS data through June 30 = $7.5 billion.Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01. Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B.Source: Property Claims Service/ISO; Insurance Information Institute

$ Billions2008 CAT losses exceeded

2006/07 combined. 2005 was by far the worst year ever for

insured catastrophe losses in the US, but the worst has yet to come.

$100 Billion CAT year is coming

eventually

129

2009 cat losses were down 29% in H1 from $10.6B in H1 2008

Top 12 Most Costly Disasters in US History, (Insured Losses, $2008)

$4.2 $5.2 $6.2 $7.3 $8.1 $8.5$11.3 $11.3 $12.5

$22.8 $23.8

$45.3

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

Jeanne(2004)

Frances(2004)

Rita (2005)

Hugo(1989)

Ivan (2004)

Charley(2004)

Wilma(2005)

Northridge(1994)

Ike(2008)*

9/11Attacks(2001)

Andrew(1992)

Katrina(2005)

$ B

illi

ons

*PCS estimate as of August 1, 2009.Sources: PCS; Insurance Information Institute inflation adjustments.

8 of the 12 most expensive disasters in US history have occurred since 2004;

8 of the top 12 disasters affected FL

In 2008, Ike became the 4th most expensive insurance event and 3rd most

expensive hurricane in US history arising from about 1.35 mill claims

130

Total Value of Insured Coastal Exposure (2007, $ Billions)

$2,378.9$895.1

$772.8$635.5

$479.9$224.4

$191.9$158.8$146.9$132.8

$92.5$85.6

$60.6$55.7$51.8$54.1

$14.9

$2,458.6

$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000

FloridaNew York

TexasMassachusetts

New JerseyConnecticut

LouisianaS. Carolina

VirginiaMaine

North CarolinaAlabamaGeorgia

DelawareNew Hampshire

MississippiRhode Island

Maryland

Source: AIR Worldwide

In 2007, Florida still ranked as the #1 most exposed state to hurricane loss,

with $2.459 trillion exposure, an increase of $522B or 27% from $1.937

trillion in 2004, but NY is a close second at $2.379 trillion.

The insured value of all coastal property was $8.9 trillion in 2007, up

24% from $7.2 trillion in 2004.

NY has more coastal exposure than any state

other than Florida

133

135

Insurance Information Institute On-Line

THANK YOU FOR YOUR TIME AND

YOUR ATTENTION!

Download at: www.iii.org/presentations/NYIA-110509.html135