NU's Top 10 Insurance Stories Of 2006 Finds Insurers Riding Record Profits

For an industry that everyone claims is boring, there never seems to be a dull moment, as the following account of the 10 most significant property-casualty insurance stories of 2006 demonstrates. NU Editor In Chief Sam Friedman details his personal, subjective choices for the biggest events and trends of the year, and invites readers to e-mail if they feel he overlooked any key developments.

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BY SAM FRIEDMAN

All things considered, 2006 was an outstanding year for the industry.

To begin with, there were no hurricanes after two record catastrophe seasons in 2004 and 2005-the first time a nonevent was my story of the year.

In addition, there were no major revelations coming out of New York Attorney General Eliot Spitzer's office-although the impact of his probes into bid-rigging and contingency fee abuse still reverberates throughout the industry, and his Election Day victory for the governorship means he'll be picking the Empire State's next insurance superintendent.

While the market kept softening-outside of catastrophe-prone property exposures, that is-the industry is reporting skyrocketing net income. The financial windfall has prompted charges of price-gouging, but insurers certainly would rather defend record profits to the public and policymakers, than have to explain soaring losses to shareholders.

Of course, problems loom-as always.

Court challenges threaten to punch a hole in the industry's flood exclusion, and its denial of Katrina claims has key politicians from both parties gunning for insurers.

Meanwhile, insurer and broker groups are badly split over such key policy issues as the need for a national disaster reinsurance fund, federal regulation and producer compensation. Still, although unpleasant, these conflicts appear to be manageable.

Last January, I peered into my crystal ball and predicted what the 10 most important stories might be this year. How did I do? Not too shabby!

First, I said Mr. Spitzer would win the governorship in a landslide, and that Lloyd's would name a new CEO. (I didn't need to be psychic to tell you that.) 

I also predicted that Hank Greenberg would "beat the rap"-and so far, he remains innocent until proven guilty. (See "Fallen Giant?" on Opinion page.)

I said AIG would settle with Mr. Spitzer (they did); that any market rebound would fall flat (it did, with a thud); that the NAIC would dodge a bullet on federal regulation (it has-for now); and that insurers would reap a fortune if the hurricane season turned out to be milder than expected. (Ka-ching!)

However, I also predicted that any flood suits would be foiled, because "contract law just isn't on their side." Ah, well. Nobody's perfect (although if insurers prevail in the New Orleans levee appeal, I'm home free!)

What lies ahead for the industry next year? Check out my Jan. 1, 2007 column.

(I invite readers to e-mail me about any major developments that I might have overlooked, at sfriedman@nuco.com. You may also post your comments on my blog at www.property-casualty.com, where I will be detailing each of the stories for your feedback over the holidays.)

#1: Mother Nature Gives Insurers A Break
#2: Will Insurers Resist Temptation To Cut Prices?
#3: Insurers May Yet Drown In Flood Claims
#4: Agents Battle Brokers Over Contingencies
#5: P-C Industry Suffers From Split Personality
#6: D.C. Power Shift Could Benefit Insurers
#7: Buffett Takes Gamble With Equitas Deal
#8: NAIC Collateral Plan Stuns Reinsurers
#9: Carriers Irked By Rating Agency Demands
#10: Hartwig Tapped To Speak For Industry