Despite fears that disaster-prone 2011 will incite higher insurance rates in the future, Allianz, one of the largest commercial insurance companies in the world, says that the toll of the damage caused by natural disasters throughout the year will not prompt widespread hikes in premiums. Jay Ralph, a board member of Allianz in charge of the North American insurance market, spoke with reporters concerning the issue, noting that the excess capacity of the insurance industry is enough to weather the storm without any major changes in policies. However, insurers should not be tempted by the rampant profitability of property-casualty insurance stemming from this year’s disasters, as that excess capacity is running thin.
This year was host to a number of disastrous natural events that have cost the insurance industry billions of dollars. Despite the massive costs associated with these disasters, the insurance industry has not been pressed to the brink of raising insurance rates. This is due, in part, to stiffer regulatory oversight imposed by many states to ensure insurers do not exploit natural catastrophes. Allianz, in fact, is one of the few insurance companies that has successfully raised its rates in the wake of April’s storms.
Ralph notes that most insurance companies are unlikely to obtain approval for rate hikes, but will have to make cuts elsewhere to fortify against the probability of future storms. Allianz has shed some weight by discontinuing a number of risky policies it once offered.