Insurance industry profits soar in 2006

Posted Thursday, April 19, 2007 by Ed Harper

A decline in catastrophic events has caused the insurance industry to post record profits in 2006. According to industry sources, the U.S. property/casualty insurance industry posted a record $31.2 BILLION NET GAIN on underwriting for the year. This has resulted in record profits for most insurance companies in 2006.

Underwriting is the methodology of evaluating risks and exposures for the prospective client. Profits from underwriting requires the insurance company to charge more premiums in comparison to what claims are paid out.

In other words, this profit has resulted from excess premiums remaining after losses have been paid out and the company’s administrative expenses have been deducted.

Following the Katrina losses in 2006 and other natural disasters, insurance companies charged their customers a higher price for the same insurance. When fewer disasters struck the companies have profited handsomely.

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