Wednesday, October 21, 2020

5 Questions about U.S. Property & Casualty (P&C) Insurance – What it does and why it matters.

What do property & casualty insurance companies do?

P&C insurance companies protect policyholders (businesses and individuals) against losses that may occur as a result of property damage or liability for losses by third parties for which the insured is liable.

Which major underlying does P&C insurance cover?

Most P&C insurance policies are written to cover homes, automobiles, and other property. Additional underlying are workers’ compensation, product liability, and medical malpractice.

What is the main difference between property & casualty insurance and life insurance industry?

Life insurance outflows are way more predictable than P&C insurance outflows. Also, P&C liabilities tend to be short-term while life insurance liabilities are oftentimes long-term. This changes the investment perspective for the insurance company: A P&C insurer must invest in assets he can quickly convert into cash, in particular stocks and bonds.

Can you explain the history of U.S. property & casualty insurers?

  • The P&C industry occurred in the 17th century where fire insurance became an important consideration.
  • The industrialization of the 19th and 20th centuries accelerated the industry’s expansion significantly.
  • In parallel, insurance against natural disasters (wind, water, snow, etc.) became more and more important in the U.S.
  • In 1948, U.S. P&C insurers were allowed to write insurance policies in multiple segments of the market (so-called multiple-line underwriting).
  • The recent past has been characterized by increased outflows (series of catastrophic events in the U.S. in the 1990s / September 11, 2001 terrorist attacks / Increasing hurricanes in the 2000s) 

Who are the top U.S. property & casualty insurers?

State Farm Group, Berkshire Hathaway Group, Liberty Mutual Group, Allstate Insurance Group, and Progressive Group.

Source: Encyclopedia of American Industries – P&C Insurance Carriers