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Accounting for Underwriting in 2008
Will underwriters turn a profit in 2008? We rounded up some of the industry's leading head underwriters and invariably this line of questioning came up. Here's a hint to what they said: There are no easy answers.
Editor's note: In April, Steve Pozzi, senior vice president and chief underwriting officer, Chubb Commercial Insurance; Donald J. Pickens, executive vice president and chief underwriting officer national markets, Liberty Mutual Group; and John R. Glancy, chief underwriting officer, XL Insurance, sat with Risk & Insurance® Editor in Chief Jack Roberts to discuss the state of underwriting today. An edited version of those comments is reprinted here. Editor: Are we going to make money in underwriting in 2008?
But who knows, if subprime gets crazy--we don't think it will--but if it does that could hurt. If we have a hurricane--not one and maybe not even two--but if you get a series of them and it hits the right place. That might hurt too. I can't remember if it was hurricane Rita or Wilma, but it was going up the Galveston River. I mean, if it had hit Houston, holy smokes ... instead it wiped out three little towns, which was bad enough. Editor: At the hurricane modeling conference this year, they spent a lot of time talking about a hurricane going up the East Cost to New York City. John Glancy: We've all watched those models. Don Pickens: I'm sure you're getting all the same pressure we are on expenses. Everybody's looking at every dollar that goes out the door now. Editor: Is there any pressure now because of the assets on the investment side may be subject to losses because of the subprime crisis? John Glancy: Insurance companies have large investment pools, and I haven't ever, in my 33 years in the business, had anybody come to me and say, "You don't have enough capital" or, "You don't have this because of something we did investmentwise." I'm sure it's happened. Don Pickens: We're all loaded with fixed incomes and these reductions in interest rates are going to put pressure on the returns, no question. So once you start putting pressure on lower investment returns, the pressure kicks up on us to start pushing price up. We're trying to get that message out and there are the folks out there, whether it's CIAB or Marketstance, that are talking about these large rate cuts, but there's a good chunk of business that's not getting rate cuts or playing right around flat. JACK ROBERTS is editor in chief of Risk & Insurance®. July 1, 2008 Copyright 2008© LRP Publications |
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