Insurance cycle toughest industry challenge

Managing the insurance cycle remains the most important challenge facing the global insurance industry, according to Lloyd’s underwriters.
New Lloyd’s research, carried out among more than 100 underwriters from the international specialist insurance market, reveals that more than half of Lloyd’s underwriters believe that managing the ‘boom and bust’ nature of the insurance cycle will be the best way to strengthen the industry’s reputation. However, over two-thirds say that the industry has not made enough progress on the issue over the past year.
The research reveals that approximately 90% of underwriters believe that windstorm is likely to be the biggest cause of loss to the industry in 2006.
The survey also highlights contract certainty and increased transparency as key challenges the market must face in 2006.
The Financial Services Authority (FSA) has given the industry until the end of 2006 to ensure contract certainty.
Lloyd’s Director of Worldwide Markets, Julian James says that, in response to the recent hurricane season, the findings indicate that the need for cycle management is crucial for insurers and reinsurers.
In last year’s survey, China was ranked as the geographical area most likely to offer the most significant opportunities for business growth, followed by the US. This year, the US has edged forward slightly in importance, with 57% of underwriters listing it as having the most significant growth opportunities in 2006, ahead of China with 56%. The growth potential of India, Canada and the Middle East also increased from 2005 to 2006.
Pricing is again at the forefront of insurance buyers’ minds in 2006, but the availability of coverage and financial security increased in importance this year.