The world economy is forecast to grow by 0. 5% in 2009, but could shrink for the first time since WW II —by 1% to 2% according to the World Bank. Emerging economies (led by China) are expected to grow by 3. 3% in 2009 Advanced economies will shrink by 1. 9% in 2009, dampening energy demand
New auto/light truck sales are expected to experience a net drop of 6. 7 million units annually by 2009 compared with 2005, a decline of 39. 6% and the lowest level since the late 1960 s Impacts of falling auto sales will have a less pronounced effect on auto insurance exposure growth than problems in the housing market will on home insurers
Average Duration** Recession = 10. 4 Months Expansion = 60. 5 Months Length of expansions greatly exceeds contractions
Inflation peaked at 5. 6% in August 2008 on high energy and commodity crisis. The recession and the collapse of the commodity bubble have produced temporary deflation.
Source: World Trade Organization; Insurance Information Institute.
Trade is expected to decline by its largest amount in decades in 2009 Source: World Trade Organization; Insurance Information Institute.
Global trade (imports and exports) fell sharply in late 2008 as major economies entered recessions. WTO estimates global trade will shrink 9% in 2009
Merchandise trade volume is shrinking as major economies enter recession
*As of March 2009.
Impairment rates are highly correlated underwriting performance and could reached a record low in 2007 Source: A. M. Best; Insurance Information Institute
P/C insurance is by design a resilient in business. The dual threat of financial disasters and catastrophic losses are anticipated in the industry’s risk management strategy. Despite financial market turmoil, high cat losses and a soft market in 2008, 81% of ratings actions by A. M. Best were affirmations; just 3. 8% were downgrades and 4. 0% upgrades 34
A++/A+ and A/A- gains
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Attacks reached a new record in March 2009 with 41 attacks, after peaking in September 2008 with 39 attacks. November 08 (37) and January 09 (36) were also busy months.
A total of 111 incidents were reported for Somalia and the Gulf of Aden in 2008, up nearly 200 percent on 2007. A total of 42 vessels were hijacked by Somali pirates and 815 crew taken hostage.
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