Commercial Insurance To Benefit From Stimulus Package

National Underwriter--February 25, 2009

BY PHIL GUSMAN

Workers’ compensation will likely be the principal property-casualty line to benefit most from the economic stimulus package signed into law by President Barack Obama, according to Insurance Information Institute president Robert Hartwig.

Mr. Hartwig, speaking during a joint online seminar sponsored by I.I.I. and Fireman’s Fund Insurance Company titled “How the Economic Stimulus Plan Will Impact the Property-Casualty Insurance Industry,” said that if the administration’s target of 3.5 million jobs created or preserved is realized, that would translate into $1.1 billion in private workers’ compensation premiums.

He said the stimulus package is unlikely to increase net premiums written by more than 1 percent, or about $4.5 billion in total. He added that since the package is only now being rolled out, insurers will likely not see the effects of it until year-end 2010.

The direct impact of the stimulus package on p-c insurers, Mr. Hartwig said, will result primarily from increased demand for commercial insurance coverages.

He noted the package contains no direct provisions that specifically address p-c insurance-with respect to spending, aid, or tax reductions-unlike other industries such as auto, homebuilding and health care.

Speaking to opportunities for insurers, Mr. Hartwig said the infrastructure expenditures will result in an increased need for insurance on workers, property and to protect against various liability risks.

Construction spending, he explained, is likely to have the most direct impact on commercial insurance. Insurers who work with contractors are going to be meeting the demand for the types of insurance necessary for infrastructure spending, Mr. Hartwig said, and insurers should be able to meet demand.

He pointed to the relative health of the industry as a sign that it can accommodate insurance needs resulting from all of the spending under the stimulus. Mr. Hartwig said 81 percent of all insurance ratings were affirmed last year, and insurance markets-unlike banking markets-are operating normally.

Insurers should expect an overall growing role of government as a result of the stimulus, Mr. Hartwig observed, and the industry must maximize the benefits of such a paradigm shift.

With the increased focus on energy efficiency and alternative energy solutions from the Obama administration, Stephen Bushnell, senior director of emerging industries commercial insurance at Fireman’s Fund Insurance Company, said insurers could find new coverage opportunities, but they also need to understand the risks.

For example, he said the liability arena around green construction is largely unexplored. Building owners and contractors will be trying to understand their obligations, what is expected of them, and what promises and guarantees they may have to make with respect to these new green initiatives.