Protection for a growing nation: The importance of insurance

With the United States preparing to celebrate 250 years since the adoption of the Declaration of Independence in 1776, this July 4 offers a chance to consider some of the essential building blocks that underpin a nation’s creation. 

The protection of precious assets, livelihoods, and communities from hazards such as devastating fires through insurance predates independence. In 1735, the Friendly Society of Charleston, South Carolina, became the first insurance company in the US to underwrite fire insurance. Firefighter Benjamin Franklin co-founded the Philadelphia Contributionship in 1752, the oldest still-operating US insurance carrier. These early insurers embraced their role in reducing risk. In Philadelphia, properties were surveyed before a policy was issued to help set and implement early construction standards, helping the city reduce fire hazards.

Having the reassurance that risks to property, life, and health are pooled and spread across a population gives individuals and businesses the security and confidence to build, invest, and support families and communities. As of 2024, the US insurance market commanded $3.3 trillion in direct written premiums. For insurers and reinsurers, the fundamentals of the earliest insurance companies remain: the need to assess and price risks and ensure there is sufficient capital to cover policy claims.

Moody’s Ratings’ involvement with the insurance market started when it was founded in 1909, providing credit analysis for the issued bonds and securities that underpinned an insurer’s capital reserves and eventually credit ratings for insurers themselves. 

Over the last 30 years, risk analysis and management have grown more sophisticated, driven by computing technology, scientific understanding, and analytical techniques. With a mission to deliver usable insights for insurers, Moody’s Analytics has built a growing ecosystem for insurers since the mid-2000s, initially focusing on economics and asset-side risk management before expanding into actuarial modeling and risk management tools and software for life insurers. Toward the end of the 2010s and into the early 2020s, Moody’s added property and casualty catastrophe risk modeling as well as analytics, cyber, climate modeling, property intelligence, and financial lines.

Supporting more than 900 insurance customers globally, the necessity of gathering risk data and analyzing, pricing, and capitalizing risk remains. The scale of the insurance market, the breadth of business lines covered, the accelerating unpredictability of hazards, rapid technology change, and emerging risks make the insurance business more complex and volatile than ever before.

Working through nearly 300 years of insurance in the US has meant insurers need to innovate to better understand and, where possible, reduce risk so vital financial protection remains available and affordable to those who need it. Insurers have faced many crises, from the devastation of Hurricane Andrew in 1992 to $200 billion in losses due to poisonous asbestos to covering terror risks after 9/11.

Each time, the insurance market and its partners work together to learn the lessons of an event, understand the new situation, and harness new science, expertise, and technology to incorporate what’s been learned. 

In response to a fast-changing risk, economic, and business landscape, insurers increasingly use future-facing modeling that can capture where risk is heading or, with emerging risks such as cyber or product liability, to get early warnings on what is coming down the track.
 

Explore how we are helping prepare insurers for the future landscape of risk: View our 10 forces shaping the insurance industry playbook data visualization and our insurance solutions e-book.