What’s New: In Brief (February 26, 2008)

The outlook is stable for the 2008 U.S. commercial market despite a soft period cycle, according to A.M. Best Co.’s assessment of the market.
“Commercial lines carriers have bolstered their positions after robust earnings in recent years by investing in price monitoring tools, predictive modelling, distribution channels and claims systems,” A.M. Best Co. notes in a release. “Additionally, the segment has embraced enterprise risk management, and the extension and permanency of the federal terrorism backstop have removed uncertainty regarding this exposure.
“While profits likely will deteriorate in the coming years, the commercial lines segment generally has positioned itself to meet the challenges of changing market conditions throughout the cycle.”

The take-up of terrorism insurance by companies in the Middle East and North Africa is still extremely low, in spite of a number of recent terrorist attacks, according to Willis Group Holdings.
“Over 23% (numerically) of terrorist attacks occur in the Middle East and North Africa,” David James, a senior underwriter from Ascot’s terrorism and political risks insurance practice, said at the General Arab Insurance Federation conference in Bahrain, according to a Willis release. “However, this region accounts for only 4% premium spend in Ascot’s total terror portfolio.
“This is in stark contrast to North America, the biggest buyer of terrorism insurance, who accounts for some 26% of Ascot’s terror portfolio, despite a relatively small number (1.2%) of terrorist attacks.”
The volume of terrorism cover being purchased in the Middle East is increasing, however, largely due to massive investment in the region.
“Since 9/11, the terrorism insurance market has undergone a rapid evolution with market capacity increasing from $50 million in 2001 to around $1.4 billion today,” Alex Clayton, Willis global markets terrorism practice leader, said in the release. “As a result of this evolution, terrorism cover has become more attractive in price and broader in coverage with wordings being tailored directly to the needs of our clients.”