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By GRAHAM BUCK, who covers European risk management issues

Economies on both sides of the Atlantic are fitfully sputtering back into life, but dole queues show little sign of shortening in 2011. Indeed, many groups of workers who have so far been shielded from the chill winds of recession may wonder how much longer they can remain safe. The mood of apprehension won't have been helped by a recent CBS MoneyWatch report, which used Bureau of Labor Statistics information to list 10 different occupations deemed to be "high-paying careers with no future."

Not surprisingly, many in the commercial-lines insurance industry don't accept such a bleak prognosis.

Chubb, for example, contends that the jobs market appears to be reasonably buoyant, with plenty of candidates and a range of opportunities in underwriting still open to the right people.

The insurance group reported that it has continued to hire at all levels--management, underwriting and administrative support--over the past three years, following the expansion of its specialist underwriting center for Chubb's financial and commercial-lines business in the U.K. and Ireland. It expects the trend to continue.

According to Stuart Payne, vice president at Chubb's underwriting and service center, technology promises to have a positive impact on both the insurance sector and underwriting roles. It represents opportunity for underwriters rather than a threat.

"We are an underwriting company. We need our highly skilled and experienced underwriters to focus on underwriting. Technology allows us to remove the burden of administration and enables us to be more competitive in the market place by ensuring that our products and services are delivered in a timely and accurate manner," he said.

"Technology enables us to access niche markets and opportunities that previously were not available to us; however, we still require the expertise of the underwriter to evaluate and price the risk and exposure. Technology provides us with additional information and support to complement the tools available to our underwriters, and it helps our people to deliver better client service," he added.

At XL Insurance, Seraina Maag, chief executive of North America P/C, believes that the trend for more complex computer models to handle personal-lines and small commercial-lines business will continue, but she is still optimistic on the prospects for underwriters.

"Change also means that old industries are disappearing while new ones are being set up, and this requires new trading solutions for complex risks," she said.

"Underwriters are able to look at what's happening in the world, what it means for our customers, and to devise appropriate solutions. Computers can't replicate those abilities," she also said. "So I believe the opposite to be true: The underwriter's job will increase in importance because of these changes and their ability to understand them fully."

Indeed, XL remains on a "talent hunt" after actively recruiting. Just in the month before this article was written, it added eight new appointments to its North American construction team.

Maag is confident that the globalization trend offers an "exciting future" for underwriters and for their employers, which should be vigorous in attracting top talent.

"I can't imagine being in any other industry, particularly one that gives its people so much exposure both to change and to anticipating change," she said.

LONDON MARKET CALLING

Those working in the London market also believe that reports of the underwriters' demise are exaggerated.

"Whilst technology is no doubt advancing, the face-to-face relationship between brokers and underwriters is a unique and essential part of how business is conducted here," stressed Sue Langley, director of market operations at Lloyd's.

"Technology in the market serves to improve and aid the business, but the complex and specialist risks that are underwritten need the expertise of the Lloyd's underwriters and always will."

Lloyd's insurer Hiscox takes the view that certain products and risks lend themselves to a more 'commoditized' insurance solution, which in turn produces efficiencies for both buyer and seller.

"Many products that started out as niche evolved and became commoditized to some degree," said Andrew Underwood, head of specialty at Hiscox USA.

"However, demand remains strong for coverage on complex and emerging risks, and an underwriter with a thorough understanding of risk and price is an optimal tool to address these areas. As the nature of demand continues to evolve, so insurers must adapt and innovate," he added.

Underwood cited recently launched crime cover for businesses against employee theft and protection for municipalities in the event of terrorism or nuclear, chemical, biological and radiological (NCBR) attacks as products that reflect the need for this specialized knowledge. He promised more will follow.

At Allianz Global Corporate & Specialty (AGCS), the group's London head of market management, Brian Kirwan, noted that risk managers increasingly take a holistic view of their organizations' risk needs and are seeking to transfer more than just the more traditional exposures. Enter the underwriter.

"The underwriter is someone who has the ability to comprehend complex risk positions and to price them accordingly," he said.

Sure, some technology is getting advanced enough to calculate a complex, global exposure. Kirwan pointed to the tremendous advances in catastrophe risk modeling software, which can crunch thousands of property portfolios and come up with loss estimates for specific perils for specific time periods. Yet these are still tools of the underwriter.

"The underwriter needs to understand how these products work, and the ability to interpret and analyze the data they produce," Kirwan said.

NEED MORE PROOF?

A detailed study on the specific values of the reinsurance underwriter is being undertaken by the Aston Business School in the United Kingdom. Titled "Trading risk: The value of relationships, models and face-to-face interaction in a global reinsurance market," the report was compiled with the participation of companies like Amlin, Hiscox, Aon Benfield and Liberty Mutual. The report focuses on the contrasting methods of underwriting reinsurance business in the London and Bermuda markets, with a follow-up planned to focus on the European markets.

Study co-author Dr Paula Jarzabkowski said that the research focuses on the respective strengths of face-to-face relationships and modeling technology.

"We found that face-to-face is certainly valuable, but only at certain points of the underwriting process and generally for the more complex risks," she said.

"There is a tendency toward efficiencies being made for the more standardized risks and those for which information is readily available and of good quality," she added. "However, in many parts of the world, the information doesn't meet these criteria and the skills and analysis of an underwriter are still vital. The Asian markets are now growing strongly, and many regions within them will be attractive.

No doubt over the coming years further efficiency gains will be achieved years and workforces will need to be more mathematically skilled.

" But while underwriters might have to raise their game, any reports that the profession has no future appears more fiction than fact," Jarzabkowski said.

January 1, 2011

Copyright 2011© LRP Publications