In a recent discussion of the state of the p/c insurance and reinsurance market Kenneth J. LeStrange, Chairman, CEO and President of Bermuda-based Endurance Specialty Insurance, Ltd. saw continuing challenges, but also increased opportunities for growth, especially by newer insurers, whose balance sheets are unencumbered with losses and claims from prior years.
Speaking shortly after the conclusion of the Bermuda Insurance Symposium, LeStrange, who’s headed Endurance since December when it was formed by Aon, Zurich Financial and other investors, said that despite the nearly $25 billion in new investment capital that has flowed into the p/c insurance and reinsurance industry since Sept. 11, market conditions will remain challenging for the insurance market.
He observed that, “The entire industry has been chronically under-reserved for some time. Asbestos and environmental claims have been higher than anticipated with much of the business written in the late 90s under-priced and very optimistically reserved, perhaps to the tune of a $68 billion or greater deficit. This, combined with the up-to $50 billion in estimated losses from 9/11, has resulted in tremendous pressure on the financial structures of the industry.”
LeStrange sees a fundamental restructuring of the market taking place right now with insurers and reinsurers are taking a new, more prudent and analytical view of risk, the correlation of risk as well as capital structures.
He pointed out the advantages of companies like Endurance. “We’re coming to the market with a large, unencumbered balance sheet and no lingering issues related to under-reserving, pricing or environmental claims,” LeStrange stated. “This is exactly what buyers of insurance are looking for right now and why many of the new entrants in the Bermuda market are very attractive.”
He warned however that not all new market entrants, despite their sophistication and capitalization are necessarily going to be successful, and stressed the need to take a long-term approach to growth, and to observe “a strong commitment to underwriting and pricing discipline”
He also addressed the need for the industry to adopt more sophisticated technology in assessing risks, and added that Endurance was “now using, or plan to use, every significant risk modeling tool available.”|”endurance, specialty, ceo, sees, market, challenges,
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