NEW YORK CITY-”It looks like it’s going to be another bad year for hurricanes,” said Andrew Castaldi, head, catastrophe and perils unit for Swiss Re during the reinsurer’s annual year-end Economic and Insurance Industry Review 2005/Outlook 2006. He cited various reasons for increased hurricane severity and frequency, including changes in population density and annual, multi-decadal, long-term climate oscillations. He noted that the Northeast is overdue for a major hurricane.

Patrick Mailloux, president and CEO, Swiss Re America Corp., said there is a greater existing catastrophic exposure than was originally believed by many. “Reinsurance programs may need to be re-thought, which is likely to lead to an overall increased demand for reinsurance.” He said the unprecedented hurricane season with hurricanes Katrina, Rita, and Wilma caused insured losses of more than $60 billion.

“Security continues to be a concern and flight to quality is anticipated to favor large and diversified players in the long run.” He said that the magnitude of losses has changed the landscape adding a new perception of risk and of how much capital is needed. “They [the hurricanes] were very expensive reminders.”

Oil prices will be the hot button economic issue in the coming year, Kurt Karl, head, economic research & consulting, North America, said. “The economy has weathered the storm of post-Katrina uncertainty and is on track for a trend growth year in 2006. With the market providing low investment yields, insurers will need to maintain underwriting discipline to sustain profits.”

He predicts that the fed will continue to raise interest rates and that inflationary pressures are rising. “Growth outlook is good. Consumer spending is up even though income growth is not.” He predicts oil will be at $67 per barrel this time next year and that if it spikes to $80 per barrel it could cause a mild recession.

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