October 19, 2004 by Canadian Underwriter
The insurance industry may defy predictions that it will sink rapidly back into price competition given the number of lingering issues still hampering the industry.
Speaking at the 3rd annual Aon Re Rendezvous, A.M. Best vice president John Andre says the issues still facing insurers include 2004’s hurricane catastrophe losses, the continued malaise of the investment markets and the inability for U.S. politicians to come up with a solution to tort issues such as asbestos. These forces may combine to keep the industry on the straight and narrow in terms of underwriting discipline.
This year’s results have seen the rate increases of 2002-2003 earn out, as well as the reforms companies took in terms of focusing on core lines of business and improved claims handling.
However, the rater continues to take a conservative approach to industry analysis, particularly with regards to regulatory reform of the auto insurance product and whether the industry will be able to make these reforms work in light of rate rollbacks and freezes. He points to last year’s experience with the Facility Association (the industry’s pool for high-risk drivers), which produced almost $500 million in losses which put a damper on profitability for many companies.
In both reinsurance and insurance sectors, pricing should remain stable with some softening in specific lines, and results for 2005 are generally expected to be strong.