Industry Is In ‘Fairly Good State’
Co-sponsored by the Association of Bermuda Insurers & Reinsurers [ABIR], the annual Property/Casualty Insurance Joint Industry Forum convened in New York yesterday [Jan.10] to assess the state of the industry and prognosticate about the possibilities and probabilities for the months ahead.
Prior to the start of a panel discussion he was participating in, senior vice president at A.M. Best Co. Matt Mosher talked to the international ratings agency’s news service senior associate editor Meg Green about the goals of the forum.
“This session is really just about the industry and where it stands now, after a difficult year,where the capitalization is, the financial strength and some of the issues that we’re seeing since the economic crisis in Europe -– how are we dealing with them and how companies are dealing with them as well,” he said.
GREEN: And what is the state of the industry?
MOSHER: The industry is very well managed in the fact that it handled the losses that it absorbed — both natural catastrophes and investment losses it might have incurred.
It’s in a fairly good state. There are still some underwriting issues in the commercial lines area that we look at that companies will have to address and what the level of the reserve adequacy is that we’ll be looking at over the next couple of years, but for the most part the industry did a very good job of controlling the losses and managing its capital to be able to support itself and be ready to protect insureds over the next year.
GREEN: How big a concern is what’s going on in Europe -– particularly the Euro crisis.
MOSHER: It’s isolated to certain companies that, when we look at the stress tests, are more exposed than others. We’ve looked at that and we have some of them under review that we continue to look at.
The issue is will they allow certain countries to go bankrupt and into default or will they manage this process and allow them to maintain their positions and kind of manage through the crisis where they’re able to continue to fund their debt albeit at a weak state and have to deal with a weak economy over a long period of time.
If they do move into a default situation — clearly if there’s a solution that requires a 50 percent haircut — that’s going to have an impact on some companies where we will see additional rating action because of that.
GREEN: And is this something A.M. Best is continually testing?.
MOSHER: About once a month we run a new version of our stress test, updating for any issues that have occurred over that month. So we continue to look at it and it is an evolving issue.
Other forum sponsors are ACORD, American Insurance Association, The Geneva Association, Insurance Institute for Business & Home Safety, Insurance Information Institute, Insurance Institute for Highway Safety, International Insurance Society, ISO, National Association of Mutual Insurance Companies, National Council on Compensation Insurance, National Insurance Crime Bureau, Property Casualty Insurers Association of America, Property Loss Research Bureau, Reinsurance Association of America and The Institutes.
