The insurance industry suffered through a terrible 2008. A perfect storm of natural disaster losses, investment losses, and a psychological loss of confidence after the collapse of AIG contributed to drive down the value of insurers. As many of the readers of this site have pointed out, businesses insured by these insurers are not in any immediate danger of losing coverage or having claims rejected, because of state regulatory guidelines and solvency requirements, but 2009 could be a tough year for insurers.
Some of the numbers are staggering. The Dow Jones U.S. Select Insurance Index was at 5331 on January 4, 2008. One year later, the index value has fallen to 2645 (although, it should be noted it has risen steadily since November 2008). Another index, the KBW Insurance Index, stood at 153 one year ago and is now hovering in the 80's. Both indexes show a market loss of about 50% for 2008. Still, if there was a good thing to say about the insurance industry for 2008 it would be that insurance was stronger than financial stocks and banks.
Business owners will benefit in 2009 as insurers strive to keep current policyholders and to find new policyholders. This will mean lower premiums for the business owner. Policyholder retention and rebuilding confidence will be a focus of many insurers, while other insurers will seek to attract new policyholders by stressing and comparing financial performance. For example, in the same year The Hartford announced a $2.6 billion third quarter loss, Chubb's CEO announced "we were still able to generate over $300 million in operating income, reflecting the continuing underlying strength of all our business units in a challenging environment. In addition, we were especially pleased with the performance of our high-quality investment portfolio in a period of unprecedented financial market turmoil.”