2009 versus 2008: Gross premiums written by the insurance segment in 2009 were 0.9% higher than 2008, with growth in executive assurance, national accounts casualty, property, and travel and accident business, primarily resulting from new business, in addition to renewal rate increases for the executive assurance business. Such growth was largely offset by reductions in casualty, surety, professional liability, and other business, as the insurance segment continued to maintain underwriting discipline in response to the current market environment. In addition, the program business experienced growth resulting from new business. However, such growth in the program business was offset by a reduction resulting from $10.9 million of premium adjustments related to involuntary pools in the 2008 period ($10.5 million on an earned basis). Net premiums written increased by 2.8%, reflecting changes in the mix of business noted above, reinstatement premiums and the impact of changes in reinsurance structure.
2008 versus 2007: The insurance segment's current year loss ratio was 12.0 points higher in 2008 compared to 2007, primarily due to the 7.2 points of catastrophic activity in 2008 and large, specific risk loss activity during 2008, while the 2007 current year loss ratio did not include any significant catastrophic activity.
2008 prior period reserve development: The insurance segment's net favorable development of $79.0 million, or 4.7 points, was primarily due to reductions in reserves in medium-tailed and long-tailed lines of business. Over 80 percent of this development is related to the executive assurance and professional liability lines of business. Executive assurance reserves developed favorably for accident years 2004 through 2006 by $15.8 million, $17.3 million, and $17.6 million, respectively. These reductions relate to less large loss activity than expected in commercial D&O, a distinctive downward trend in security class action cases filed from 2004 through 2006, and to the claims-made nature of the coverage. Accident year 2007 experienced unfavorable development of $19.7 million relating to the re-evaluation of claims given additional information available during 2008 regarding the impact of the credit crisis. Reserves for professional liability developed favorably as well, with the majority of the favorable development relating to accident years 2003 through 2005 with $5.2 million, $8.1 million, and $19.1 million, respectively.
2009 versus 2008: The insurance segment's underwriting expense ratio was 30.6% in 2009, compared to 30.4% in 2008. The acquisition expense ratio was 13.9% for 2009, compared to 13.2% for 2008. The acquisition expense ratio is influenced by, among other things, (1) the amount of ceding commissions received from unaffiliated reinsurers, (2) the amount of business written on a surplus lines (non-admitted) basis and (3) mix of business. In addition, the 2009 acquisition expense ratio reflected an increase of 0.2 points related to the estimated net favorable development in prior year loss reserves, compared to a 0.9 point increase in 2008. The comparison of the 2009 and 2008 acquisition expense ratios reflects changes in the form of reinsurance ceded and the mix of business. The insurance segment's other operating expense ratio was 16.7% for 2009, compared to 17.2% in 2008. The operating expense ratio for the 2008 period included approximately 0.7 points of costs related to an expense management plan which incorporated workforce reductions and the relocation of certain of the insurance segment's U.S. operations. The 2009 operating expenses reflect expenses related to an expansion of the insurance segment's presence in the executive assurance and professional liability lines of business, partially offset by the benefits of the expense management plan implemented in 2008.
The reinsurance segment's underwriting income was $303.2 million for 2009, compared to $173.0 million for 2008 and $318.5 million for 2007. The combined ratio for the reinsurance segment was 73.7% for 2009, compared to 85.3% for 2008 and 74.5% for 2007. During 2008, the reinsurance segment incurred estimated pre-tax net losses, after reinsurance and net of reinstatement premiums, related to Hurricanes Gustav and Ike of $197.4 million. Before reinsurance, such estimated losses were $221.5 million. The components of the reinsurance segment's underwriting income are discussed below.
Ceded premiums written by the reinsurance segment were 3.2% of gross premiums written for 2009, compared to 4.5% for 2008. In 2009, Arch Re Bermuda ceded $3.8 million of premiums written, or 0.3%, under the Treaty with Flatiron discussed above, compared to $24.7 million, or 2.1%, in 2008, with the lower level due to the expiration of the treaty. Net premiums written by the reinsurance segment in 2009 were 7.8% lower than 2008, primarily due to the items noted above. For information regarding net premiums written produced by major line of business and geographic location, refer to note 3, "Segment Information," of the notes accompanying our consolidated financial statements.
2009 versus 2008: The reinsurance segment's current year loss ratio was 18.8% lower in 2009 than in 2008, and benefitted from a higher level of property and short-tail business and a minimal level of catastrophic activity in the period. Net premiums earned in property and other short-tailed lines were approximately 70% of the total for 2009, compared to 64% in 2008. The 2009 current year loss ratio included 2.0 points of current period catastrophic event activity, compared to 19.6 points for 2008, primarily related to Hurricanes Gustav and Ike.
The simulation results shown for each segment do not add to the total simulation results, as the individual segment simulation results do not reflect the diversification effects across our segments. For informational purposes, based on the total simulation results, a change in our Loss Reserves to the amount indicated at the 90th percentile would result in a decrease in income before income taxes of approximately $1.22 billion, or $19.67 per diluted share, while a change in our Loss Reserves to the amount indicated at the 10th percentile would result in an increase in income before income taxes of approximately $1.11 billion, or $17.98 per diluted share. The simulation results noted above are informational only, and no assurance can be given that our ultimate losses will not be significantly different than the simulation results shown above, and such differences could directly and significantly impact earnings favorably or unfavorably in the period they are determined.
In April 2009, the FASB issued guidance regarding the determination of fair value when the volume and level of activity for the asset or liability have significantly decreased and the identification of transactions that are not orderly. This affirms that the objective of fair value when the market for an asset is not active is the price that would be received to sell the asset in an orderly transaction, and clarifies and includes additional factors for determining whether there has been a significant decrease in market activity for an asset when the market for that asset is not active. Under this guidance, if an entity determines that there has been a significant decrease in the volume and level of activity for the asset or the liability in relation to the normal market activity for the asset or liability (or similar assets or liabilities), then transactions or quoted prices may not accurately reflect fair value. In addition, if there is evidence that the transaction for the asset or liability is not orderly, the entity shall place little, if any weight on that transaction price as an indicator of fair value. This guidance also expanded certain disclosure requirements. This guidance was effective for periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. We elected to adopt this pronouncement effective for the interim period ending March 31, 2009, and its adoption did not have a material impact on our consolidated financial condition or results of operations.
See note 2(n), "Significant Accounting Policies-Recent Accounting Pronouncements," of the notes accompanying our consolidated financial statements.
The following table summarizes our top ten exposures to fixed income corporate issuers by market value at December 31, 2009, excluding guaranteed amounts:
The following table provides a reconciliation of the net Loss Reserves for 2009, 2008 and 2007:
During the 2009 third quarter, we purchased asset-backed and commercial mortgage-backed securities under the FRBNY's TALF program. As of December 31, 2009, we had $250.3 million of securities under the TALF program which are reflected as "TALF investments, at market value" and $217.6 million of secured financing from the FRBNY which is reflected as "TALF borrowings, at market value." See "-Contractual Obligations and Commercial Commitments-TALF Program" for further details on the TALF program.