Prem Watsa on insurance industry outlook in 2010 annual letter

Our businesses in Canada and the United States continue to be challenged by highly competitive market conditions. Excess capacityhas led to downward pressure on rates. Another year of benign catastrophe experience inNorthAmerica has encouraged aggressive pricing. While the industry’s accident year combined ratio is running at 100% or more, reserve releases from prior years have allowed calendar year combined ratios to be reported at less than 100%. As the reservoir of reserve redundancies dries up, and as bond portfolios roll over into today’s lower interest rates, the pressure for a market correction will mount. It’s impossible to predict when the market will turn; we must remain patient!

Also:

On average we are writing at about 0.5x net premiums written to surplus. In the hard markets of 2002-2005 we wrote, on average, at 1.5x.We have huge unused capacity currently and our strategy during these times of soft pricing is to be patient and be ready for the hard markets to come.

It will be very interesting to see what happens when underwriting capacity diminishes again and the P&C-markets harden up.

Leave a comment

Filed under Uncategorized

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s