A Firm Foundation The Insurance Industry & Its Contributions to Society Robert P. Hartwig, Ph.D., CPCU, President Insurance Information Institute  110 William Street  New York, NY Tel: (212)  Fax: (212)   St. John’s University School of Risk Management, Insurance & Actuarial Science New York, NY April 10, 2008

Key Roles Insurers Play in Society Insurers as Claims Payers Philanthropists Contributors to the Economy Employers Taxpayers Investors Educators Promoters of Public Safety Builders in Times of Greatest Need: Catastrophes

INSURERS AS CLAIMS PAYERS Trillions and Trillions Paid (& Counting)

Incurred Losses, Property/Casualty Insurance * *Losses occurring within a fixed period whether or not adjusted or paid during the same period, on a direct basis before reinsurance. Sources: NAIC Annual Statement Database, via Highline Data, LLC, ISO. Insurance Info. Institute; $ billions P/C insurers paid out $275 billion each year on average to millions of people and businesses since 2000.

Cumulative Incurred Losses, P/C Insurance * *Losses occurring within a fixed period whether or not adjusted or paid during the same period, on a direct basis before reinsurance. Sources: NAIC Annual Statement Database, via Highline Data, LLC, ISO. Insurance Info. Institute; $ Billions P/C insurers paid more that $2.2 trillion in claims to tens of millions of people and businesses since 2000

Life Insurance Claims & Benefits Paid, * *On a direct basis before reinsurance. Sources: NAIC Annual Statement Database, via Highline Data, LLC; Insurance Info. Institute. $ Billions Life insurers paid more than $2.3 trillion in claims and benefits between 2000 and 2006

Share of Losses Paid by Reinsurers, by Disaster* *Excludes losses paid by the Florida Hurricane Catastrophe Fund, a FL-only windstorm reinsurer, which was established in 1994 after Hurricane Andrew. FHCF payments to insurers are estimated at $3.85 billion for 2004 and $4.5 billion for Sources: Wharton Risk Center, Disaster Insurance Project; Insurance Information Institute. Reinsurance is playing an increasingly important role in the financing of mega- CATs; Reins. Costs are skyrocketing

INSURERS AS PHILANTHROPISTS Insurers are Generous with Their Money and Time

Insurance Industry Charitable Contributions to U.S. Beneficiaries, 2006 Sources: The Conference Board; Insurance Info. Institute; $ Millions In 2006, the insurance industry’s donations to U.S. beneficiaries totaled $147.1 million, placing it among the top 15 contributors among large U.S. corporations.

Top 10 Total Contributions Per Worldwide Employee By Industry, 2005* *Companies not reporting worldwide employee figures are excluded. **Includes other diversified manufacturing. Sources: The Conference Board; Insurance Info. Institute; Charitable contributions per employee totaled $560 in 2005, 7 th highest of any industry

INSURERS AS CONTRIBUTORS TO THE ECONOMY Insurers are an Important Segment of the Economy

Insurance Sector’s Share of Gross Domestic Product (GDP), The insurance industry accounted for nearly $300 billion or 2.4% of US GDP in 2005 Source: Insurance Information Institute: Insurance GDP

INSURERS AS EMPLOYERS Good Jobs, Good Pay

Insurance Carriers Employment and Payroll, Source: U.S. Dept. of Labor, Bureau of Labor Statistics; U.S. Dept. of Commerce, Bureau of Economic Analysis; Insurance Information Institute. Insurers employed more than 2.3 million people in 2007, with total wages approaching $200 billion.

INSURERS AS TAXPAYERS Insurers are a Major Source of Government Revenue

Insurance Industry Taxes Paid and Incurred, * *Based on page 3, Annual Statement, Liabilities, Surplus and Other Funds. Sources: Insurance Info. Institute; P/C and Life insurers paid $174 billion in taxes between 2002 and 2006

INSURERS AS INVESTORS Insurers are a Among the Largest Investors in the World

Insurance Industry Total Financial Assets, Sources: Board of Governors of the Federal Reserve System; Insurance Info. Institute; $ billions Insurers are among the largest investors in the world, facilitating global growth in the private and public sectors

Selected Insurance Industry Financial Assets, 2006 Sources: Board of Governors of the Federal Reserve System; Insurance Info. Institute; $ billions As the world’s largest muni bond investor, insurers fund hundreds of billions of dollars in state and local projects such as schools, roads and health care

INSURERS AS EDUCATORS Educated Consumers Make the Best Customers

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Information & Research

INSURERS AS PROMOTERS OF PUBLIC SAFETY Investments in Public Safety & Security

INSURERS AS BUILDERS IN TIMES OF GREATEST NEED Catastrophic Losses: Insurers Most Critical Job

Most of US Population & Property Has Major CAT Exposure Is Anyplace Safe?

U.S. Insured Catastrophe Losses* *Excludes $4B-$6b offshore energy losses from Hurricanes Katrina & Rita. Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01. Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B. Source: Property Claims Service/ISO; Insurance Information Institute $ Billions 2006/07 were welcome respites was by far the worst year ever for insured catastrophe losses in the US, but the worst has yet to come. $100 Billion CAT year is coming soon

Catastrophe Claims and Losses in the U.S., * Source: ISO’s Property Claim Services Unit; Insurance Information Institute; Insurers paid $155 billion in catastrophe losses on 18.3 million claims arising from 192 events between 2000 and 2007

States With Largest Insured Catastrophe Losses in 2007 Source: PCS/ISO; Insurance Information Institute CAT STATS 1.18 million CAT claims across 41 states arising 23 catastrophic events

Distribution of 2007 US CAT Losses, by Type and Insured Loss Personal (home, condo, rental, contents etc.) accounted for 68% of all US insured CAT losses paid in CAT claim count was 1.18 million. Source: PCS division of ISO. $ Billions

Insured Losses (Millions 2007 $) Top Catastrophic Wildland Fires In The United States, Fourteen of the top 17 catastrophic wildfires since 1970 occurred in California *Estimate from CA Insurance Dept., Jan. 10, Source: ISO's Property Claim Services Unit; California Department of Insurance; Insurance Information Institute.

Inflation-Adjusted U.S. Insured Catastrophe Losses By Cause of Loss, ¹ Source: Insurance Services Office (ISO).. 1 Catastrophes are all events causing direct insured losses to property of $25 million or more in 2006 dollars. Catastrophe threshold changed from $5 million to $25 million beginning in Adjusted for inflation by the III. 2 Excludes snow. 3 Includes hurricanes and tropical storms. 4 Includes other geologic events such as volcanic eruptions and other earth movement. 5 Does not include flood damage covered by the federally administered National Flood Insurance Program. 6 Includes wildland fires. Insured disaster losses totaled $297.3 billion from (in 2006 dollars). Wildfires accounted for approximately $6.6 billion of these—2.2% of the total.

Catastrophic Hurricane Claims and Losses in the U.S., * Source: ISO’s Property Claim Services Unit; Insurance Information Institute; Insurers paid $89.1 billion in hurricane losses on 7.7 million claims between 1998 and 2005

Global Insured Catastrophe Losses by Region, Notes: figures for N. America include US only figure includes only property losses from 9/11. Source: Insurance Information Institute compiled from Swiss Re sigma issues. North America accounted for 70% of global catastrophe losses $ Billions

HURRICANE KATRINA Rebuilding Communities & Lives

Top 10 Most Costly Hurricanes in US History, (Insured Losses, $2005) Sources: ISO/PCS; Insurance Information Institute. Seven of the 10 most expensive hurricanes in US history occurred in the 14 months from Aug – Oct. 2005: Katrina, Rita, Wilma, Charley, Ivan, Frances & Jeanne

Insured Loss & Claim Count for Major Storms of 2005* *Property and business interruption losses only. Excludes offshore energy & marine losses. Source: ISO/PCS as of June 8, 2006; Insurance Information Institute. Hurricanes Katrina, Rita, Wilma & Dennis produced a record 3.3 million claims

Hurricane Katrina Claim Status on Storm’s 1 st Anniversary* 95% of the 1.2 million homeowners insurance claims in Louisiana & Mississippi are settled, with just 2% in dispute *Hurricane Katrina made its north Gulf coast landfall August 29, Source: Insurance Information Institute survey, August 2006.

Hurricane Katrina Claim Status on Storm’s 2 nd Anniversary* 99% of the 1.2 million homeowners insurance claims in Louisiana & Mississippi were settled as of the storm’s second anniversary in 2007 *Hurricane Katrina made its north Gulf coast landfall August 29, **Unsettled implies that the claim is in the process of settlement, involved in mediation or litigated. Source: Insurance Information Institute survey, August 2007.

Hurricane Katrina Insured Loss Distribution by State ($ Millions)* *As of June 8, 2006 Source: PCS division of ISO. Mississippi accounted for 33.5% of the insured losses paid and 29.5% of the claims filed Total Insured Losses = $ Billion

Growth in Mississippi Construction Component of GDP Pre/Post-Katrina Insurance dollars helped construction spending surge in MS Sources: US Bureau of Economic Analysis; Insurance Information Inst.

Insured Offshore Energy Losses for Recent Major Gulf Storms Hurricanes Katrina, Rita and Ivan cost energy insurers at least $7 billion Sources: Insurance Information Institute research estimates. *Midpoint of estimated range for $2.0 to $2.5 billion)

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