June 8, 2004 by Canadian Underwriter
Risk managers and brokers have been shocked by the rapid return of soft market conditions, a panel of speakers told the World Insurance Forum in Bermuda yesterday.
“We’re not seeing any sort of rate stability in the marketplace today,” admits Peter Garvey, president & CEO of North American operations for Marsh Inc. Specifically, the softening of the directors’ and officers’ (D&O) market despite combined ratios in the line still exceeding 100% has confounded brokers, adds Mario Vitale, CEO of Willis North America.
“Gravity”, in the form of additional capacity chasing marketshare, is causing a speedy return of rate reductions, with just a few notable exceptions. These exceptions include earthquake and flood risks in the property line, environmental, health care, fiduciary and products liability, as well as some segments of the construction sector, Vitale points out.
Risk managers, for their part, seem more focused in taking advantage of the softening market by buying increased limits rather than reducing the high deductibles taken on during the hard market. “Once people get comfortable with a higher retention, they are going to stay with that,” predicts Garvey.
Underwriters also seem more comfortable in offering increased limits as opposed to lower deductibles, adds Lance Ewing, vice president of risk management for Caesars Entertainment and past president of the Risk & Insurance Management Society (RIMS). Ewing says he is glad to see a return to technical underwriting on the part of insurers, but adds risk managers are finding the current roller-coaster ride of market swings a challenge.