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Slowly improving economy challenges insurers

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SOUTHAMPTON, Bermuda — The U.S. economy is improving slowly, complicating investment strategies for insurers and reinsurers, according to speakers at the 2015 Bermuda Captive Conference in Southampton, Bermuda, on Wednesday.

During the first quarter of 2015, the U.S economy contracted, said Ryan Wang, U.S. economist for global banking and markets with HSBC Securities (U.S.A) Inc. in New York, citing the Bureau of Economic Analysis of The Federal Reserve.

This was “surprising,” Mr. Wang said. “I don’t believe that in certain fundamental terms the economy is contracting,” he said.

Results were skewed, he said, by temporary disruptions such as severe weather in the eastern two-thirds of the nation, as well as work stoppages amid labor disputes at West Coast ports, which impeded the flow of goods to the U.S.

Second-quarter results and beyond should be more favorable, he said.

“U.S economic growth has probably slowed but certainly not contracted, and in the second quarter of this year I expect to see growth in the 2.5% to 3% range — and in fact for the rest of the year we should probably get growth somewhere in that range,” Mr. Wang said.

“I actually think it’s been a difficult time for investment strategists over the course of the past 12 to 18 months,” said Henk Potts, director of global investment strategy for Barclays Wealth and Investment Management in London.

“It has been a more volatile recovery in the U.S. economy than we anticipated,” Mr. Potts said.

He did, however, agree that the U.S. economy did in fact not contract in the first quarter. “I think it’s right to say that the contraction reported at the beginning of the year was wrong,” he said.

“We think the U.S. economy actually grew by about 1.8% in the first quarter,” Mr. Potts said.

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