Unless you’ve been living under a rock you know that we are into 2012. In recent posts I have offered up trends specific to the internet technology (IT) industry and social media/public relations industry. To follow the “2012 trend” theme that I seem to be covering as of late, how about we look at the 2012 trend perspective from key insurance industry executives? Why the insurance industry you may ask? Trends and strategies in the insurance industry are an indicator of future expansion of the economy in reference to the risk sensitivity of insurance providers and changes in government regulation, specifically when it comes to Excess and Surplus (E&S) insurance providers. These insurance brokers provide insurance to business entities (C-corporations, S-corporations, LLC’s etc.). Get the tie-in now?
Here is the 2012 perspective from some key executives in the E&S insurance market. These executives provide their assessments of where the biggest opportunities and greatest challenges will be found in the 2012.
Hank Watkins, President
Lloyd’s America
“Without being able to predict the nature or scale of the disasters we’ll experience in 2012, the key areas of concern for us are sluggish investment returns, surplus capital and relatively modest increases in premium rates. Against this backdrop, we continue to face uncertainty and delay in the European and U.S. regulatory environments. The risk of increasing compliance costs has not diminished and poses yet another challenge to the market’s competitiveness. These realities will make disciplined, responsible underwriting as important as ever in 2012.”
Alan Kaufman, Chairman & CEO
Burns & Wilcox
“I do not anticipate that 2012 will be much different than 2011. The main reason is due to the overall U.S. economy. The world economy also has an effect. Rates will remain relatively flat, both in property and casualty, except for specific areas of the country where property rates may harden in small percentage points. I do not see rates weakening, due to the cost of reinsurance and some of the standard markets having difficulties with their loss experience in 2011. The personal-lines area in our segment of the specialty-insurance world in the latter half of 2012 will harden, with small percentage increases.”
Wendy Houser, Managing Director of Wholesale Marketing
Markel Corporation
“Markel is optimistic about the market opportunities in 2012. After six-plus years of declining premiums, we are seeing areas where premiums are, in fact, increasing. Our competition is pulling back, tightening forms, increasing rates or exiting the marketplace in a number of product lines. Markel has been growing throughout 2011–and in the last few months we have picked up the pace. We intend to capitalize on this trend in 2012.”
John Pagoumian, President
NAPCO
“In order to get final approval for premiums in excess of budget expectations, we expect more risk managers will need to bring alternative quotes to their senior management. If there’s no change in submission quality or marketing strategy, it will be unrealistic for risk managers to deliver these alternative quotes, much less further reduction in premiums, without reducing critical coverage limits and increasing deductibles. So, we expect to see significant opportunities in 2012 from agents and risk managers who have already had difficult renewal negotiations and don’t need to be convinced that better submission quality and a fresh approach are required for optimal terms and pricing.”
Robert Cubbin, CEO
Meadowbrook Insurance Group
“For sustainable profits to re-emerge, prices need to go up. While we are seeing some bottoming out and even price hardening in certain specific product lines or market segments, we still do not foresee a turn in the market cycle in the near future. There is still a lot of capacity and strong competition present in the market. Given the existing excess capacity available in the market–[combined with] fierce competition, low yields on fixed-income portfolios and tough economic conditions–profits will continue to be a struggle to achieve consistently. A lot in 2012 will depend on the weather.”
Jeremy Johnson, Product Line Executive for Specialty Lines
Chartis
“Specifically, we believe there are continued opportunities in environmental liability, corporate aviation and cyber liability, and we see a heightened interest in the development of solutions to address multinational exposures, whether driven by risk-management, tax or regulatory concerns. Underwriters need to be able to differentiate their product, drawing attention to coverage, service, claims handling and market commitment. There remains an abundance of competition, with many carriers looking to build market-share at the expense of profit; the temptation to allow the insurance products to be commoditized along price lines must be resisted.”
Gary Thompson, Executive VP and Chief Underwriting Officer
The Hartford
“We’re targeting industries such as health care, technology, life sciences and private education, and we’re continuously improving our specialized capabilities to help our agents and brokers capitalize on these market opportunities. The industry continues to be challenged by a series of headwinds, including slow economic growth, sustained high unemployment levels, investment yields near all-time lows, and more frequent and more severe natural catastrophes. However, we believe the pendulum has shifted, and the market is clearly firming. We expect to see commercial property and casualty (P&C) pricing continue to increase, and we will continue to drive for price increases in 2012.”
Joseph J. Beneducci, Chairman, President & CEO
ProSight Specialty Insurance Holdings
“Technology will continue to play an increasing role in satisfying customer needs. I’m not talking about the technology we use to rate and issue policies. While that’s definitely important, too, I’m talking about the use of technology and data-mining techniques to better understand customer behaviors, needs and buying trends.”
“The new breed of successful specialty-insurance provider isn’t simply waiting for new submissions to show up in their inbox, but rather is proactively learning and improving their offerings based on the evolving needs of their customer base. Specialty carriers and producers will find it increasingly difficult, if not impossible to successfully improve and distinguish their value proposition without a more sophisticated use of technology and data-mining.”
Joel D. Cavaness, President
Risk Placement Services Incorporated
“Market opportunities for the wholesale community will expand in 2012. The standard markets are feeling the pains of the last year, and they feel the pain from the pricing that has been occurring over the last five or six years with significant pricing pressures, especially in the casualty lines. Although it is a long way from being a hard market, we are seeing a dramatic increase in submission flow and a fair amount of increase in bound new business.”
“The challenge of a transitioning market is two-fold. One is to manage the amount of marketing activities that will go on in this type of a market. Many accounts will simply be marketed because the retailer does not know what to expect out of his incumbent market, so it is up to him to check the waters.”
“The second factor is dealing with people who know how to sell in a changing market. If you think back, it has been a long time since anyone has had to deliver an increase to a client. We have to be in a position to provide clients market intelligence, be well out ahead of the expiration, and provide them with advance notice on market conditions and guidance on their particular account.”
Mario Vitale, President
Aspen U.S. Insurance
“We don’t foresee any new challenges at this time for 2012; however, there are many ongoing challenges that will continue into the New Year, one of which is the excess capacity in the marketplace. Despite the firming we are seeing in the marketplace, the number one factor keeping rates below adequacy is too-robust competition in some lines, with more than enough supply to meet marketplace needs. We are seeing a few out-lying companies that seem to be more concerned with production than profit. Sooner rather than later, we believe they also will recognize the importance of returning to the basics of responsible underwriting and pricing in a very challenging and risky marketplace.”
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