For the uninformed, a “slow cat year in the insurance business means a year that had relatively few cat-astrophes.” Get it? The insurance companies got it, in the form of some impressive bottom lines. Nine-month 2006 results announced last week by the Insurance Information Institute and the Property Casualty Insurers Assn. of America show that insurers posted a $24.4 billion net gain on underwriting. That compares with a $2.5 billion underwriting loss in the year-earlier period. A $27 billion turnaround over a nine month period, thanks to those slow cats.

Third-quarter results also jumped, as insurers posted net underwriting income of $9.3 billion in 2006 vs. an underwriting loss of $15.2 billion during the third quarter last year, when Hurricanes Katrina and Rita struck. That’s a twenty five billion dollar shift over a single quarter, and an excellent illustration of how volatile the property/casualty business can be.

However according to the trade associations who put out this good news, “The turnaround in results is benefiting insurance buyers as well, by stimulating competition and keeping rate increases at bay in most lines. ” Keeping increases at bay? What industry showing $26 billion in profits over 2006 should be in need of rate increases?

In addition, added the trade groups, “Insurers’ improved finances could hamper efforts to extend the federal terrorism insurance backstop scheduled to expire at the end of 2007.” This last item is the federal legislation that was passed following the destruction of the World Trade Towers which was designed to limit the exposure of property/casualty firms in the wake of an attack of that magnitude. One cannot help but draw parallels with the federal takeover of flood insurance and backstopping of crop insurance that allowed the insurance companies to take what they wanted and leave the rest to the feds.