View this article online: https://www.insurancejournal.com/news/international/2007/10/18/84367.htm
Jean-Paul Rignault, chief executive of AXA Corporate Solutions, called for premium rates to be stabilized if insurers are to achieve adequate pricing and the current soft market cycle, now taking hold, is to flatten out.
He spoke at the close of a seminar in Bristol for clients and brokers arranged by AXA’s UK branch, adding that if premium stabilization is to be achieved it means restoring underwriting discipline. “Clearly, we would like to avoid a sudden and tough wake-up situation as happened in 2000/2002, with another very hard market cycle,” Rignault stated. “Stable and adequate rates will help everyone, not just underwriters but clients and brokers too.”
AXA’s seminar also focused on changes, including sessions on global warming and the recent UK floods, which were “more or less linked to climate change.” The consensus opinion indicated that the “situation was not going to improve,” and therefore pricing “had to take this evolution into consideration.”
Referring to the sub-prime mortgage financial crisis in the US, Rignault called it a “free” warning for insurers, and served as a clear reminder for those still motivated by cashflow underwriting. He indicated that some insurers’ good performance over the past two years had been achieved through substantial reserve releases, but that this could not happen every year.
Rignault also touched on a number of important issues for the insurance industry, including the following (in summary form):
— Inflation doesn’t result solely from EU directives, the usual suspect, as there are other causes. For example, the change in the UK’s NHS scheme to facilitate recoveries from insurers for medical costs would bring an additional burden for liability policies.
— The US ‘plague’ of class actions was coming to Europe, witness the planned introduction of these in France. Such changes should impact on the adequate pricing of liability longtail exposures.
— Solvency II will result in an increase in the required capital to run the same business, even in highly-diversified insurance groups, yet capital was a scarce resource.
— He foresaw expansion beyond the UK and Europe, into the US, China, India, Vietnam, Korea, Ukraine and Poland.
Rignault called for changes in several areas, arguing that “insurance companies were not investing enough in R&D. He referred to the launch last Thursday by AXA Group chief executive Henri de Castries of the AXA Research Fund to help ensure that funding is available to pursue high-quality, independent academic research (See IJ web site Oct. 11).
In conclusion Rignault noted that “everything today is global – the economy, clients, risk, risk management and solutions. International programs will continue to play a key role in the financial protection of our clients.”
Source: AXA – www.axa.com