Several years ago we have attended Zurich insurance company conference for insurance professionals.
Everything was there: interesting people, interesting meetings, interesting facts. For example, Zurich was one of the pioneers in insurance technology, introducing first online rating system for agents, in the U.S.
Today Zurich Insurance Company is one of the major players on the world insurance arena. At that convention, Zurich NA Director of Sales (former) said that the hard market is was in the past and will be way in the future.
It looks like the future has come: the insurance and reinsurance industry will come under pressure to increase premium rates and focus on underwriting discipline in 2011, according to experts at Swiss Reinsurance Co. Ltd.’s economic forum in Zurich.
Low interest rates will continue to dampen insurers’ and reinsurers’ investment returns and force them to focus on underwriting discipline in order to remain profitable, said Kurt Karl, Swiss Re’s chief economist for the Americas in Zurich.
Rates for nonlife commercial lines remain low, particularly in the United States, said Thomas Hess, Swiss Re’s chief economist, also in Zurich.
There are signs that rates are beginning to increase for auto business in the United Kingdom and Italy, said Mr. Hess, but rates on the whole remain soft for most lines of commercial insurance throughout the world.
Rates likely will begin to harden in 2012, depending on prior-year results developments and other factors, said Mr. Hess.
Swiss Re believes liability coverage is underpriced and that the market needs to undergo “a correction,” according to Mr. Hess. The longer it takes for that upturn in prices to occur, the sharper the price rises will be, Mr. Hess said.
As economies continue to recover from the recent global economic crisis, demand for insurance coverage likely will pick up, said Mr. Hess.
Premium volumes, which fell in 2008, likely will continue to rise slowly, he said.
For 2010, worldwide premiums are likely to have risen by 1.3%, compared with a 0.1% increase in 2009, according to Swiss Re data. For 2011, worldwide insurance premium volume likely will increase by 2.8%, while a 3.7% increase is predicted for 2012.
The insurance and reinsurance industry emerged from the global financial crisis very well and should not be treated as a systemic risk by regulators, said Mr. Karl.
If regulators treat insurers and reinsurance as a systemic risk and increase regulation, any increased cost to insurers and reinsurers likely will be passed on to buyers in the form of higher rates, Mr. Karl said.
Solvency II, the risk-based capital regulatory regime under development in the European Union and slated for introduction in 2013, likely will increase demand for reinsurance, said Mr. Hess.
Reinsurance is a substitute for solvency capital, and insurers’ need for solvency capital likely will increase under the new rules, he said.