Insurance Veterans’ Forecasts for 2012

Now that the year 2011 is behind us, let’s take a look at what might be ahead. Insurance Journal spoke with leading industry professionals and asked them what they are expecting this year. If their forecasts are any guide, 2012 is going to be another very interesting year for the P/C insurance industry. Here are their commentaries. (You can read the longer versions of their comments at www.InsuranceJournal.com.)

Robert Cox, executive vice president, Chubb & Son, and chief operating officer for Chubb Specialty Insurance:

Overall, 2011 was a challenging year due to the weak economy, rising bankruptcy filings, high unemployment rates, record EEOC discrimination charges, dramatic increase in state merger objection cases, and severe financial stress placed on business operations.

In 2012, we are watching areas related to the weak global economy, heightened regulatory requirements and new legislation, and data security breaches. We’ll watch the development of D&O activity related to the growing number of public company merger objection lawsuits and the high number of private company bankruptcies. Activities surrounding unemployment rates, Dodd-Frank and health care legislation, increased Labor Department oversight, and the M&A activity could also create an increase in exposure for companies.

Steven Pozzi, chief operating officer for Chubb Commercial Insurance:

Natural catastrophes, from tsunamis to earthquakes and tornadoes, presented many challenges to companies worldwide in 2011. As a result, companies found themselves confronting a myriad of exposures from business interruption to valuing and rebuilding property and managing supply chain disruptions. Companies will need vigilance to combat increasing exposures from products and services throughout the world — some of which were unheard of as recently as 30 years ago.

Jeremy Johnson, product line executive for specialty lines, U.S. and Canada region, Chartis:

Opportunities will be where we are able to leverage underwriting acumen to select risk better than our competition. Margins are now extremely thin, and the ability to confidently select and price risk will yield superior results, especially when combined with tools to enable customers to better manage their own risk. Specifically, we believe there are continued opportunities in environmental liability, corporate aviation and cyber liability, and see a heightened interest in the development of solutions to address multinational exposures, whether driven by risk management, tax or regulatory concerns.

Perry Rotella, chief information officer, Verisk Analytics:

The industry is witnessing an explosion of data, meaning new technologies are needed to effectively manage it. There is a transition from predictive analytics operating on terabyte-sized datasets to analytics operating on petabyte-sized datasets. These emerging data sets are an order of magnitude larger than what the insurance industry is typically used to dealing with.

Also, tablet computers can become a true business game changer. An increased use of tablet computers throughout 2011 by sales, service, and other mobile workers suggests that in 2012 tablets will evolve from personal entertainment devices and come of age in the business context of insurance.

Coletta Kemper, vice president of industry affairs, The Council of Insurance Agents & Brokers:

The first wave of baby boomers are retiring and that will have an impact on the industry, but will create opportunities. Boomers will take trillions of assets out of the system, but also create need for wealth management instruments, i.e. annuities, etc. as well as supplemental health care products, i.e., long-term care, etc. Retiring boomers could also result in a talent shortage. The industry is already facing a talent void. Recruitment in the industry is a challenge, although better in this economy, and now they will have to fill positions left by experienced, knowledgeable retirees.

Stephan Christiansen, managing director, Conning Research:

Personal lines and commercial lines underwriting cycles remained diverged in 2011, with premium rate growth continuing for personal auto and homeowners products and generally softer pricing in commercial lines.

However, more insurers and pricing surveys affirmed commercial lines price-firming in the second half of 2011. Small business markets, workers’ compensation in some states, and property exposed to windstorms are showing the most consistent firming trends.

J.C. Sparling, executive vice president, Preferred Brokerage:

The state of the excess and surplus property market is changing daily as insurers tally up losses and see combined ratios edging higher. This has led to an uneven market with pressure on insurers to raise rates in certain classes and geographies. Specifically, these include properties in coastal areas and habitational risks, although we are seeing broad momentum for rate increases in other areas as well.

Topics Trends Legislation