Insurance News

Property/casualty insurers should cut costs to weather conditions

Posted on: October 19, 2011

Property/casualty insurers should reconsider cost reductions as a means of dealing with a “tough operating environment,” according to an analysis that Keefe, Bruyette & Woods Inc. released Monday.

The current environment in which property/casualty insurers operate is characterized by slowing reserve releases, “ever lower investment yields” and weak premium growth, according to “A Look at Cost Cutting Potential for P&C Insurers.”

Salaries an issue

But the analysis by the New York-based investment bank said there’s little discussion of cost-cutting in the industry. Instead, insurers should, among other things, look at rising salaries as an area where cost-cutting could be considered.

The analysis noted that many companies went through a round of layoffs and cost reductions in 2008 and 2009, which the firm said is “always a painful effort and not one which management teams want to go through again.”

But the analysis also said that as “hopes for a meaningful improvement in the economy fade” and the end of the soft market appears to be “more of an easing than a traditional hardening,” cutting costs and managing capital may be the “easiest tool available to improve profitability.”

Copyright © 2011. Crain Communications, Inc.

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