Inflation in Property-Casualty Insurance: How Bad Can It Be?


Mike Warner  
Conning, Inc.

Conning Research: Inflation Volatility a Significant Planning Concern for Property-Casualty Insurers

--Profound potential impact on operating results and economic value

(Hartford, CT) January 5, 2010—Inflation and inflation volatility should be significant concerns for property-casualty insurers, especially for the next few years, according to a new study by Conning Research and Consulting.

“While the insurance industry has dealt with inflation and associated volatility in the past, there has been little inflationary impact in the past 15 years,” said Stephan Christiansen, director of research at Conning. “As we look ahead, there appears to be increased prospects for inflation in components that could have significant impacts on insurer operating results and economic value, both good and bad.”

The Conning Research study, “Inflation in Property-Casualty Insurance: How Bad Can It Be?” reviews the history of inflation and its components in the U.S., its impact on the property-casualty industry and potential mitigation strategies for negative impacts. The study also analyzes the likelihood of inflation in the 2010-2012 Conning industry forecast period.

“In our study we looked at historical industry results, and then modeled the personal auto and workers compensation lines of business in order to better analyze inflation impacts from both steady and volatile increases,” said Christiansen. “In some early stage inflation scenarios, operating results actually improve, but longer term we see dramatic value destruction from hyper-competitive pricing and loss reserve development. Insurers have a number of tools at their disposal to mitigate inflation risk, but must be prepared to respond quickly, particularly in the case of a volatile inflation event.”

“Inflation in Property-Casualty Insurance: How Bad Can It Be?” is available for purchase from Conning Research & Consulting by calling (888) 707-1177 or by visiting the company’s web site at

About Conning Research & Consulting

Conning Research & Consulting provides insurance industry analysis to insurers and industry stakeholders. Its published research includes market coverage of 30 segments of the industry in addition to industry forecasting and identification and analysis of major strategic issues. As a result of its wealth of experience and intimate knowledge of the insurance industry, Conning understands industry challenges and opportunities and provides in-depth analyses on a wide range of industry products and issues. The Conning name has represented excellence in independent insurance industry research for 50 years.  Conning Research & Consulting is a division of Conning, a provider of asset management and insurance industry research and consulting services to insurers. Conning is headquartered in Hartford, CT.