Study Finds EU Insurers Believe They Are Well Prepared for Next Market Cycle

September 16, 2004

A study, released at the Reinsurance Rendezvous in Monte Carlo, has concluded that “the vast majority of European insurers (85 percent) feel well prepared for the next market cycle.”

The survey, commissioned by The Insurance Leadership Institute of GE Insurance Solutions and independently conducted by Tillinghast, indicated that “approximately a third of the insurers surveyed (32 percent) cited ‘managing the cycle’ as one of the top strategic issues their company will face over the next five years.”

Commenting on the report -“Facing the Future: Challenges for European P&C Insurers-” Ron Pressman, GE Insurance Solutions’ Chairman, President and CEO stated: “That number is surprisingly high. Although most insurers say they are well prepared now, their actions at the beginning of a market cycle change will tell the real story. At that crossroads, will they choose the path of maintaining a stable, rational market?”

The report also found that 69 percent of those responding agreed “that insurance cycles last about five years, with 15 percent saying seven years or longer and 11 percent suggesting two years. A total of 58 percent of the insurers surveyed predicted that the current hard market would last at least two more years. But 43 percent of respondents said they had difficulty determining when the underwriting cycle would turn.”

The main obstacles to effectively managing the problems caused by the cycle cited by the respondents were difficulties in “sustaining client or broker relationships if exiting classes of business in a soft market (49 percent) and difficulty determining and monitoring premium rate adequacy (46 percent).”

The study noted: “Cycle management was the sixth most cited strategic issue that insurers will face over the next five years. Approximately a third of the insurers (32 percent) selected that response; among other issues mentioned were the following:
— 65 percent chose distribution effectiveness and productivity as the main strategic issue for their company
— 63 percent mentioned increased competition, restructuring and consolidation
— 54 percent listed expense and cost management
— 33 percent selected IT management
The key drivers behind insurers’ current reinsurance strategy were the desire to protect against catastrophic events (92 percent) and aggregations of risk (85 percent).

“Other key survey findings include:
— 50 percent of insurers surveyed cited price as a key area of influence for reinsurance brokers
— 38 percent suggested that brokers influence the market by providing buyers better choice of reinsurance markets

“The European Executive Survey 2004 was conducted between March and July 2004. A total of 79 insurers responded — mainly small- to medium-sized insurers operating in the United Kingdom, Germany, France, Italy, Spain and Scandinavia.”

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