In making its 2004 predictions for the insurance industry, Tillinghast-Towers Perrin says consolidation will be key trend in the coming year, with major players dominating the market. Taking off from the recent merger of St. Paul and Travelers, the firm predicts these major players will be surrounded by smaller niche players. “In both personal and commercial lines, a strong brand will become more critical to success,” says Steve Lowe, global p&c practice leader for TTP. “Greater scale will be required to support the distribution of mass-market products. Going forward, size will be defined by companies like AIG and the new St. Paul-Travelers combination.” Other market trends include the continuing increase in tort costs, more surprising reserve hits, and a stabilizing price market. TTP says those who predict price softening will likely be disappointed. “There is just no appetite for it,” says Lowe. “Prices should begin to level out because they are perceived to be adequate, but they won’t fall because the mood of the underwriters hasn’t transitioned from fear to over-confidence.” TTP expects a “new religion” to develop around underwriting moving forward. TTP also predicts alternative risk transfer methods including self insurance will continue into the soft market due to a much smaller market as a result of insurer consolidation and insolvency. Commercial clients are also consumed with meeting the requirements of Sarbanes-Oxley and will be looking at overall enterprise risk management retaining more risk in order to focus on catastrophic or difficult coverage lines. Finally, insurers can expect rating agencies to become even more interventionist moving forward, with a broader business management focus.