While the $787 billion American Recovery and Reinvestment Act has no provisions specifically addressing property-casualty insurance, the various elements of the stimulus package will mean increased demand for commercial insurance, experts say.

Robert Hartwig

With $111 billion dedicated to infrastructure spending, the result will be a need to insure workers, property and protect against liability risks, according to Robert Hartwig, president of the Insurance Information Institute, a research organization.

Hartwig made his remarks as part of a recent presentation, sponsored by the III and Fireman’s Fund Insurance Co., on how various aspects of the stimulus package could affect insurance.

With employment the primary objective of the stimulus package, workers’ compensation stands to gain the most, he said.

“Were the target of 3.5 million jobs created or preserved …this would amount to $1.1 billion in private workers’ compensation premiums,” Hartwig said.

President Barack Obama‘s stimulus package infuses billions in spending, aid and tax cuts.  Hartwig said that 24.1%, or $132.2 billion of the package is allocated toward direct spending, the component that will benefit property-casualty lines, including workers compensation, commercial auto and commercial property and liability.

Recession’s impact

Hartwig said that the recession – now 14 months old by most estimates – has hit the property-casualty industry hard, including areas of construction, workers’ compensation and sureties.

A rising unemployment rate is eroding payrolls and workers’ compensation’s exposure base and the lowest number of housing starts since 1959 means less insurance for homes and coverage for those who build them and manufacture goods to build those homes.

The stimulus package includes $143.4 billion in construction spending, including one-third for transportation, in areas such as a new electric grid, highway infrastructure, and  home weatherization.

“I believe insurers will be able to meet the demand for all types of insurance needed to make sure the stimulus package is maximally effective,” he said.

While $288 billion in proposed tax cuts will have no direct impact for insurers, Hartwig noted potential secondary impacts to auto and home insurers if consumer spending rises and real estate markets and residential construction improve.

Going ‘green’ a good move for insurer

Stephen Bushnell, senior director for emerging industries with Fireman’s Fund, said there are various opportunities for insurers, agents and brokers “to respond to our customers’ needs,” particularly the stimulus package’s allocation of $6.3 billion for energy efficiency and conservation grants and $5 billion in residential green retrofits.

Fireman’s Fund began insuring green buildings in the commercial market in 2006 and in the residential market last year, as the company “believes green and energy efficient buildings are better risks,” he said.

Bushnell said “insurers, their agents and brokers as part of the risk management process, have the opportunity, and some would say the duty, to help their customers assess and manage the risks that are related to all these issues under the stimulus plan.”

This story originally appeared in the April 2009 print edition of Insurance & Financial Advisor.