The increasing effect of AIDS-related claims. Slow gains in reinsurance. Changes in accounting for income taxes that may result in lower reported earnings.
These are some of the issues the insurance industry will have to contend with in 1988, according to Peat Marwick, the accounting and consulting firm.In a presentation called Insurance: A Constant State of Change, the firm offered its outlook to nearly 100 industry analysts last week at the Vista International Hotel.
Gary Roubinek, national insurance practice director, said that AIDS- related claims, $290 million in 1986, will grow at an alarming rate.
In the next 13 years, costs could total $80 billion to $100 billion, Mr. Roubinek said.
Reinsurance continued to recover in 1987, but at a slower rate than the previous year. Sources estimate $10 billion to $20 billion in unrecoverable reinsurance, he said.
Surprisingly, the stock market crash did not seem to cause much damage to the industry. It may have cost the industry $12 billion in unrealized gains, but because the market increased by less than 5 percent over the entire year, the crash was not as significant as first feared, he said.
Bruce Bunner, a partner in the firm and a former California insurance commissioner, endorsed tougher state scrutiny of the industry. Even those in the industry question the efficacy of state regulations, he said.
Joseph Jordan, a tax partner, said that after the Tax Reform Act of 1986, the insurance industry will not see marked changes this year. At best, he said, we'll have fine tuning.
After strong gains over the last two years, property and casualty reserves will strengthen only moderately in 1988, according to James Faber, a management consulting partner. This will leave the industry short $3 billion to $3.5 billion in 1988, he said.