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ISO'S MARCON DECLARES AMERICA'S PROPERTY/CASUALTY INDUSTRY 'FUNDAMENTALLY SOUND' DESPITE RECESSION AND OTHER ECONOMIC THREATS

 ISO'S MARCON DECLARES AMERICA'S PROPERTY/CASUALTY INDUSTRY 'FUNDAMENTALLY SOUND' DESPITE RECESSION AND OTHER ECONOMIC THREATS
 NEW YORK, Jan. 30 /PRNewswire/ -- Though buffeted by an economy that has been mired in recession, the U.S. property/casualty insurance industry remains sound, Fred R. Marcon, president of Insurance Services Office, Inc. (ISO), said today.
 Speaking to an issues forum sponsored by the Society of Chartered Property and Casualty Underwriters, Marcon cited a number of positive signs for the financial health of the U.S. property/casualty industry.
 "Whether judged by assets, the insolvency record, reserve adequacy, regulatory oversight or its ability to deal with external influences on the underwriting cycle, this industry remains fundamentally sound," Marcon said.
 The ISO president acknowledged, however, that "what is broken is the public's confidence in our industry's stability." Among the leading reasons for that, he said, was that the property/casualty industry has been linked in the public's mind with the problems encountered by life insurers, banks and thrift institutions.
 "We've all been tarred with the same brush," he said.
 When examined carefully, however, those comparisons don't hold up against the financial facts, Marcon said.
 "Next to the staggering taxpayer costs of cleaning up the S&L crisis, the cost of insurer guaranty funds for insolvent property/casualty insurers amounts to a drop in the bucket," said Marcon. He noted that over the past 22 years, insurers have paid less that $4 billion in guaranty-fund assessments to cover claims against insolvent insurers, while taxpayers just last year alone spent $67 billion -- nearly 17 times that amount -- to bail out failed banks and thrifts.
 Meanwhile, the property/casualty industry doesn't face the same asset problems as life insurers, Marcon said, pointing out property/casualty companies have less than 4 percent of their total assets invested in real estate, mortgages and junk bonds.
 Another positive, Marcon said, is the property/casualty industry's record on shortening the average time to maturity of its bond holdings, from an average 14 to 11 years. Shorter bond maturities protect insurers from severe market-value fluctuations caused by interest-rate swings.
 In his keynote address to the industry leaders, the ISO president further explained that the property/casualty industry's reserve adequacy record has been "far better" over the past three years than in the early and mid-1980s -- another cyclical low period for insurers when interest rates were much higher. Marcon added that new regulatory requirements for actuarial opinions on loss reserves will improve loss reserve adequacy and will improve "the perception that insurer reserves are adequate, as well."
 While underscoring the fundamental health of the industry, Marcon cited an ISO study that recently documented that over the past two underwriting cycles the property/casualty industry has ranked below the average of U.S. industries profitability, but carried at least an average risk.
 He also cited another ISO study that shows sizable year-to-year variation in insurer financial results, especially among poor performers.
 "Year-in, year-out, the industry's top performers realized an average rate of return ranging from 16 to 26 percent, a spread of 10 points," he said.
 "But marginal performers never earned more than 8.5 percent, and have suffered losses exceeding 20 percent, a wild swing of 30 percentage points," he said.
 Meanwhile, ISO's analysis of economic conditions found that higher interest rates increased insurer profitability from investments.
 "But when we at ISO took a closer look at recent cycles, we found that as interest rates rose, overall income deteriorated," Marcon said. "That's because insurers' total profitability has been shaped by cycles in underwriting results, not investment results. And underwriting results deteriorated when interest rates rose."
 Said the ISO president: "So even when the bottom line is propped up by investment income, insurers can't afford to forget that their real business is insurance -- not investing."
 -0- 1/30/92
 /CONTACT: Christopher Guidette of the Insurance Information Institute, 212-898-6609/ CO: Insurance Services Office Inc. ST: New York IN: INS SU:


CK-KW -- NY053 -- 5216 01/30/92 11:51 EST
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Date:Jan 30, 1992
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