in the property/casualty industry probably occurred earlier this year. The latest numbers indicate premium growth is flat and profitability is down, albeit from a stratospheric level.
The flat premium growth is especially troubling as it coincided with a period of significant economic expansion(up 4.8%). When businesses are growing and selling more stuff, they need more inputs – and the additional raw materials, transportation, workers, new equipment, and new facilities drives up insurance costs – there’s just more stuff to insure.
Claims costs aren’t dropping – the medical CPI (which is far less than the WC CPI) was up 5%, the cost to repair autos was up as well (auto insurance is the single largest component of the P&C industry).
So what’s happening? Simple. Insurers want to generate more profits so they sell more insurance. And that requires them to cut prices to compete. Which, in about two years, will result in significantly higher losses.
Yes, the underwriting ratio of 93.8 (first nine months of 2007) is one of the industry’s best-ever numbers. Profits will decline from here on out, until ‘pricing discipline’ returns. Which, if history is any guide, will happen in 2-3 years.
What does this mean for you?
If you have P&L responsibility, send up a flare and document it. The good times are coming to an end.

Live it up while you can, because tomorrow is coming – and it probably won’t be near as nice as today.
That’s the message from a recent report on the property/casualty insurance industry, which by all accounts is enjoying halcyon days.

Continue reading Woe is the P&C industry

May well be more lightly attended than this year, if a very spotty survey of exhibitors is any indication. Vendors, who accounted for at least half of all attendees, were uniformly unhappy about exhibit floor traffic in New Orleans this year.

Continue reading RIMS next year

There was not one, but two (2) fire alarms in my hotel last night. So what, you say?
Here’s what. The hotel is chock-full of risk managers, safety professionals, underwriters, and property/casualty claims execs. And not a one of them followed the mechanical lady’s pleas to “exit the hotel quickly and calmly by using the stairs”.
“Risk manager” is a professional designation, not a personal attribute.

Disaster preparedness and recovery and storm and weather forecasting are new to, and very obvious on the exhibitor floor at RIMS. Since this year’s annual conference is in New Orleans, that’s no surprise.
The disaster theme began in the morning keynote, where an official from CDC talked about the potential for a pandemic.
While disasters natural and biological may be the theme, the common nuts and bolts of risk management are more what attendees are after. Several risk managers were left scratching their heads after the keynote.
The consensus was “well, that was kind of interesting, but the chances for a pandemic are pretty small, and there are a lot of other issue out there that I’m really worried about…like TRIA renewal, the insurance cycle, property rates…”
The disaster folks do have cool videos and charts, and have spent big bucks on their displays.
The other interesting attendee is Blackwater, the private security and protection firm that has been very visible in Iraq of late. They are pitching protection for American companies’ overseas locations and employees, and may have a ready audience among oil companies operating in Nigeria and the mid-east.
All in all, a different flavor this year, one that is just a bit disconnected from the real concerns of most risk managers.

I’m attending the annual gathering-of-the-property/casualty-industry-tribes, vendor trinket-and-trash -ree-for-all, expense-account-depletion event known as RIMS (Risk and Insurance Management Society’s annual meeting), and will be blogging from New Orleans for the next three days.
Before I dive into the exhibit hall, a quick note complimenting the organizers for their commitment to the local folks. This year RIMS coordinated a volunteer day, wherein insurance types donned working garb (jeans., not suits) and headed out to communities in the city to continue the clean up from Katrina.
This was not only a great thing for the organizers and organization to do, it may well have been a sobering experience for the risk managers. Few have ever seen the likes of the devastation they were cleaning up yesterday. Picking up debris while surrounded by broken glass, trash-strewn streets, empty lots and condemned buildings can’t help but add raw appreciation of the reality of “risk”; risk that in most cases has been viewed solely from a financial perspective.
This Risk:Real World may well be worth repeating.