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Gift-giving is never far from my mind at this time of year, and it has made me think about the gifts that the past year has brought to all of us.
One could be forgiven for thinking that only Christians and Jews practice gift-giving, but in fact gifts are encouraged by other major religions of the world, including Islam, that also celebrate holidays in December.
No matter what one's faith, year's end is always a good time for reflection. What gifts did 2006 leave us and what are we going to do with them? What should remain on our wish lists for the coming year?
Insurers and reinsurers received a huge gift in the form of a light catastrophe year. That was a welcome change from 2005, when a string of hurricanes--including evil sisters Katrina, Rita and Wilma--cost insurers more than $61 billion. So far in 2006, estimated cat losses have totaled one-tenth of that figure. With higher property rates and fewer losses, insurers stand to make solid financial results for the year.
What will insurers make of this gift? Will they bank the proceeds and stick to prudent underwriting or go back to competing on price, contributing to rate volatility? Sorry to say, on all but catastrophe-exposed business, insurers appear eager to cut deals. Stay tuned. Business Insurance will report on that in-depth in our annual Property/Casualty Market Report on Jan. 9.
Most risk managers would welcome reasonable rates that remain stable, rather than have to budget for--and explain to their bosses--the peaks and valleys of the historical underwriting cycle. Offering less volatility isn't a bad gift to investors, either.
Speaking of investors, private equity continued to pour into insurance entities this year, replenishing some of the capital depleted after the catastrophes in 2005. This gift does come with strings attached, though. Investors will want to see healthy returns from the insurers and reinsurance vehicles they're backing.
Recently, the Occupational Health and Safety Administration offered a gift to employers, in the form of an online risk management tool for disaster cleanup operations that will help evaluate hazards and provide guidance to workers. OSHA's generosity has not always been welcomed, though, and a few years ago employers forced the agency to take back its "gift" of an ergonomics standard. Perhaps the workplace safety watchdog is better at responding to businesses' needs these days.
On the benefits front, employers offering health savings accounts got a gift this month when Congress approved changes that make contributing to an HSA easier and more advantageous. HSAs and the high-deductible health plans that accompany them are good tools for employers to reduce the cost of health care benefits, but they still don't really address the underlying causes of rising health care costs. That will have to stay on the wish list for '07.
A big gift for pension plan sponsors came earlier in 2006, with the Pension Protection Act. This sweeping legislation is the most significant pension benefit law in decades. It will help to shore up underfunded plans and create certainty for hybrids such as cash balance plans, which previously were in limbo.
Voters in New York gave insurers and brokers a present in November by electing Attorney General Eliot Spitzer as governor. While his successor promises to stay the course Mr. Spitzer set, no doubt the industry is breathing a sigh of relief that its most aggressive prosecutor is moving on. Mr. Spitzer's gift to insurance consumers is greater transparency and disclosure, something we hope insurers and brokers will keep on giving.
In the meantime, have a happy and safe holiday season.