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By DAN REYNOLDS, senior editor of Risk & Insurance®

The midyear meeting of the Target Markets Program Administrators Association came off as billed in Baltimore this week. This is a place where people roll up their sleeves and get to work.

In keeping with the Target Markets worky-worky atmosphere, David Paul, a principal with ALIRT Insurance Research LLC, was laying it on pretty thick on Tuesday, thick in a good way.

Paul and his associates at the Windsor, Conn.-based research and analysis company have devised their own ratings systems for both property/casualty companies and their subsidiaries or competitors that operate in the program space.

The idea, according to Paul, is that, in the rarified, sharp-penciled world of program administration, it pays to know your carrier as well or better than you know yourself. In fact, that could be the only way it may pay.

"You want to have a long-term carrier in place because it's hard to move these lines of business," Paul told about 40 attendees at his Tuesday morning seminar on financial trends for program carriers.

THREE CARRIERS ABOVE AVERAGE

In the national program space, the folks at ALIRT have identified three national carriers that they say represent above average financial stability. Those are Chubb subsidiary the Federal Insurance Co., the Hartford Fire Insurance Co. and the Travelers Indemnity Co.

Paul had especially kind words for Chubb and its subsidiary Federal, which he and his associates at ALIRT think do a good job in "tending the store".

"They don't tend to play around with some crazy things," is the way Paul put it.

But, some words of caution. In Paul's understanding of the property/casualty cycle, we are still in what he refers to as the "cheating" phase. That's the time near the end of a soft market when carriers--and that includes program carriers--write business that, if they had their heads on straight, they wouldn't be writing, but they do so in the cheating phase to stay competitive and to give themselves something to do.

What follows this cheating period is the "pain" period, when carriers start to realize how wrong they have been, and then the "fear" phase, when carriers start reacting to their pain and doing something about it.

NO HARD MARKET YET

It's in that "fear" phase that Paul feels the hard market begins. And guess what, despite all that has been written and conjectured on this topic, he doesn't think we're there yet. Generally speaking, he's thinking 2010 rather than later in 2009, as others have guessed.

"Will it be as steep as 2002?" Paul asked about the coming hard market and how it might stack up against what occurred when a bubbling mini-recession was smitten by the calamity of Sept. 11, 2001.

"I don't think so," said Paul.

He explained that industry surpluses, despite the investment losses of 2008, at $467 billion still far outstrip what was on the books in the late 1990s, when industry surpluses were $339 billion and $342 billion in 1998 and 1999, respectively.

And reported property/casualty industry combined ratios, which ALIRT estimates were at around 103.5 percent in the current "cheating" phase in 2008, were at around 107.7 percent in our last "cheating" phase in 1999.

WIN BEN STEIN'S WISDOM

Earlier Tuesday morning, attendees were entertained by the noted financial columnist, speechwriter, network talking head and unapologetic Republican Ben Stein, a resident of Los Angeles who, while remaining upbeat and comical, was suffering from a visible case of nasal irritability from the springtime pollen of his native Maryland.

Stein's talk, in turn, was interrupted by the hotel's alarm system, which was agitated by a sizable water main break that afflicted Baltimore's inner harbor, snarling traffic and rendering the hotel's water supply undrinkable.

May 1, 2009

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