Goodbye to a challenging 2016
Nigel Fitzgerald, chief executive officer, Advent
Our industry continues to evolve, while in the middle of a rating environment which may represent the ‘new normal’. It is an exciting, yet very challenging time which, like many of the year’s votes, may well produce unexpected winners and losers.
Persistently low interest rates have compelled investors to explore alternative homes for their capital. The recent period of relatively low insured natural catastrophe losses has allowed many of them, who had previously viewed the insurance as unattractive, to become comfortable with the sector and view our industry as just another investment asset class. This has created a consistent and, at least when viewed historically, heightened level of interest.
It is difficult to see this dissipating in the short to medium term, although their patience is sure to be tested in the coming years as the impact of a prolonged soft market begins to bite. With poor underwriting results and reserve deficiencies becoming evident, we foresee inconsistency increasing as new entrants try to establish themselves while existing markets try to re-underwrite loss-making areas of their portfolios.
With this in mind, there has never been a greater premium on the quality of a company’s value proposition and its risk management strategies. Insurance companies need to be of the highest quality, proficiently integrating services and functions in order to compete for the customer’s attention yet also maintaining an acceptable margin for their shareholders. This level of adaptability and agility will be an opportunity and challenge for companies of all shapes and sizes.
Robert DeRose, senior director, AM Best
