The Sky May Not Fall In, But...

Bedeviled by a host of woes, insurance companies enter 1991 with little relief in sight. Insolvencies among both life and property-casualty insurers have skyrocketed in the past two years and will only get worse as the nation's economic slump deepens. Comparisons with the savings and loan mess are overblown--insurers are in much better shape than the S&Ls. Even so, the insurance industry's fundamentals are discouraging. Earnings will continue to erode. And insurers seem sure to get unaccustomed scrutiny from worried politicians and regulators.

The chief culprits causing the industry's problems are poor investments and slowing premium income. Not even the biggest players are immune. Travelers Corp. posted a $499 million third-quarter loss last year, largely because of shaky real estate investments. First Executive Corp., burdened with massive junk-bond holdings and bleeding from its customers' tendency to cash in policies, is scrambling to restructure its debt.