Editorial (November 2011 issue)
While US insurers and reinsurers will have one eye firmly fixed on the economic troubles in Europe, and their consequences for world economies, as they head into the biggest industry conference of the year, they will be acutely aware that they have their own challenges to ponder.
A recent report by Lloyd’s of London has caused controversy in the domestic US insurance market. It suggested that government intervention in insurance markets causes more problems than solutions and that state and federal involvement should be kept to a minimum.
It cited the development of a government backed reinsurance fund for Florida as an example of where a scheme has done more harm than good.
It is not the only example of government involvement in insurance in the states. The report will likely be the subject of debate in the lead up to the renewals.
This issue will be unlikely to supersede some of the bigger, more general, industry issues, however.
The dynamic in the industry remains paradoxically problematic. Wider economic troubles and a very poor investment environment mean that the industry remains something of a safe haven for investors. This has kept capital in the industry and is even attracting additional money in small amounts.
This solid capital base means that competition for business remains fierce. This, in turn, is keeping rates low. Yet the irony is that insurers and reinsurers also face the same tough challenges securing decent investment returns—squeezing their profits in the process.
This dynamic now seems likely to continue well into 2012. Gradually, as the world economies and investment markets improve, capital will eventually leave the industry and rates will harden.
For now, however, expect a bumpy ride into the next renewals. And on top of all of that,
US companies are facing increasing stiff competition from their international peers, which are suddenly enjoying an increasingly easier time in the US thanks to many states relaxing collateral requirements.
This challenging environment means that US companies will have to work even harder than before to develop new and more innovative products that address the needs of policyholders in ways in which their competition do not.
Click here to see the November issue
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While US insurers and reinsurers will have one eye firmly fixed on the economic troubles in Europe, and their consequences for world economies, as they head into the biggest industry conference of the year, they will be acutely aware that they have their own challenges to ponder.
A recent report by Lloyd’s of London has caused controversy in the domestic US insurance market. It suggested that government intervention in insurance markets causes more problems than solutions and that state and federal involvement should be kept to a minimum.
It cited the development of a government backed reinsurance fund for Florida as an example of where a scheme has done more harm than good.
It is not the only example of government involvement in insurance in the states. The report will likely be the subject of debate in the lead up to the renewals.
This issue will be unlikely to supersede some of the bigger, more general, industry issues, however.
The dynamic in the industry remains paradoxically problematic. Wider economic troubles and a very poor investment environment mean that the industry remains something of a safe haven for investors. This has kept capital in the industry and is even attracting additional money in small amounts.
This solid capital base means that competition for business remains fierce. This, in turn, is keeping rates low. Yet the irony is that insurers and reinsurers also face the same tough challenges securing decent investment returns—squeezing their profits in the process.
This dynamic now seems likely to continue well into 2012. Gradually, as the world economies and investment markets improve, capital will eventually leave the industry and rates will harden.
For now, however, expect a bumpy ride into the next renewals. And on top of all of that,
US companies are facing increasing stiff competition from their international peers, which are suddenly enjoying an increasingly easier time in the US thanks to many states relaxing collateral requirements.
This challenging environment means that US companies will have to work even harder than before to develop new and more innovative products that address the needs of policyholders in ways in which their competition do not.
Click here to see the November issue
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