Execs, Analysts Offer Varying Perspectives
BY PHIL GUSMAN AND CHAD HEMENWAY
INSURANCE-COMPANY executives, a globalbrokerandanalystfirmsare weigh- ing in on whether the market is hardening—and their responses include “yes,”
“maybe,” and a debate over whether the
traditional hard- and soft-market cycles are
even relevant anymore in the marketplace.
W.R. Berkley CEO William R. Berkley
stated at the Goldman Sachs U.S. Financial
Services Conference in New York on Dec.
6 that the industry is now “definitively
in a hardening market…We’re just at the
beginning of price increases.”
Aside from prices hardening, Berkley
said terms and conditions are changing,
allowing business written to become more
profitable.
However, a Willis report focusing
mostly on the energy-insurance market,
that also discussed the global insurance-pricing cycle, states that talk of a market
turn might be slightly premature.
Willis noted that at the end of 2008,
many prognosticators believed the financial
crisis would trigger a market-hardening.
“What actually happened, though, was the
opposite,” the report’s introduction reads.
This time around, with the eurozone
crisis and fragile economy presenting
similar, though not identical, challenges,
which forced AIG to retain business and
offered its rivals the chance to compete for
AIG’s business.”
Meanwhile, Towers Watson in mid-
December released the results of its latest
But despite
commercial pricing
trending upward, Bruce Fell, managing
director of Towers Watsons’ P&C practice
in the Americas, said, “We will not be in a
market where insurance-company results
can improve and we start to enter a real
hard market” until rate increases exceed
loss-cost inflation.
Defining markets as hard or soft in the
traditional sense may not even be relevant
going forward, according to John Q. Doyle,
As these tools become more advanced and
accurate, companies will be able to deploy
capital more shrewdly, which could produce
“shorter, flatter cycles” with “less up-and-
down” fluctuations—unless, of course, there
is an extraordinary, well-timed event.
P&C COMBINED RATIO
2007
2008
2009
2010
2011*
92.4
104.4
101.0
102.7
109.4
*After 9 months
Source: ALIRT Insurance Research
The industry is now
“definitively in a
hardening market…We’re
just at the beginning of
price increases.”
William R. Berkley,
CEO of W.R. Berkley
Willis said the onset of a hard market may
once again be restrained. The broker noted
that one difference between today and
2008 is “the big question mark that hung
over the future of AIG at the end of 2008,
