Hot Topics: Is the Hot Streak Over?

Prices are soft, everyone knows that.

The property/casualty sector may well not be profitable in underwriting by the end of 2008, everyone knows that too.

But here’s a little something we may not know: It’s that there’s been an uptick in noncatastrophe-related risks.

Y’all may not have noticed, but it’s something to keep an eye on, according to Shivan S. Subramaniam, chairman and CEO of FM Global.

There were some nasty tornados in February and March, and the insured losses they caused were more than $1 billion. The spinners aren’t any more powerful than they used to be, but there are a lot more commercial properties standing in their way, whether they’re located in “Tornado Alley,” in Oklahoma, or in the more moist climes of the Southeast.

A billion dollars here and a billion dollars there isn’t quite enough to make much of a dent in the wallets of the property/casualty coffers, so the nasty spinners in themselves aren’t anything to get too bothered about.

But if you couple that with the normal frequency levels of natural catastrophes, then you’ve got a problem. “You combine all of those and you wonder that in 2008, it’s almost certain to have an underwriting loss,” said Subramaniam.

Oh yes, then there’s the subprime issue, but that’s a whole other story. Suffice it to say that after two very good years, 2008 could put a sudden end to the hot streak. Ouch. Taking a bite out of the bottom line might mean subbing in a pickup band for the A-list entertainment like Hootie and the Blowfish.

While it’s true the industry might swing to an underwriting loss, it’s still a little bit early to tell. Analysts, as we know, love “forward looking” thinking. But they’re often guilty of looking too far forward.

We’ll just have to wait and see.