DNCs Coll(F)usion GPShip Strzok an IceberGowdy says:
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This article touches on the key factors in 2017 results and S&P’s outlook for the P&C industry. The usual suspects are brought up again, with proper attention given to varied ERM practices among industry carriers.
Extrapolating on the comment by S&P analysts about some insurers facing a potential downgrade, there may be an momentary upturn in acquisitions… of a few of the (about to be) downgraded carriers by larger insurers with efficient ERM programs. The latter would benefit from the formers’ otherwise (presumed and tested during due diligence) sound organization and distribution chain. Two other factors that would trigger ‘forced mergers’ of weakened carriers are mentioned in the article; i.e. adverse reserve development and cat losses. The stronger ERM practices of the acquirers will be applied to the acquired, possibly (likely?) yielding an economic value gain through the merger. Otherwise, wise management will resist the urge to merge, to survive and thrive.
Adverse reserve development of (potentially) downgraded insurers in the next few weeks will be interesting & informative to monitor and compare to other carriers on a ratio-to-surplus basis. Annual reports are likely to glance over that ratio due to a focus on cat losses relative to premium and surplus… as a means of downplaying bad results for 2017.
There are so many states who keep enacting huge YoY decreases in workers compensation rates, for example, and carriers all over the country keep buying up premium, with no adjustment to how they reserve and no movement on the types and quantities of credits they are issuing.
AmTrust has sought capital infusion twice already and there are rumors of them approaching potential suitors that could take them private. They are notorious for pricing their risks too low and under-reserving, as well. It will almost certainly bite them in the butt eventually. They will join the garbage heap of so many other once-great carriers if they do not attempt a course correction and stop chasing rates to the bottom of the barrel.
Marsh’s Protective Insurance is the next one to have problems, I am calling it now. They features a mass exodus of C-level execs a couple of years ago and have now gone all out in an effort to keep as many accounts on the books, profitable or not. I am seeing them offer credits of 20% to insureds with high hazard exposures to keep them, or they move them to their “Tier 1” paper Sagamore Insurance Company.
My best guess: 2018 is a huge year of flux. I am willing to bet either several carriers refile their Loss Cost Multipliers higher, or you are going to see more Guarantee Ins Co, Dallas National (Freestone), Tower Ins types of situations soon.
This article touches on the key factors in 2017 results and S&P’s outlook for the P&C industry. The usual suspects are brought up again, with proper attention given to varied ERM practices among industry carriers.
Extrapolating on the comment by S&P analysts about some insurers facing a potential downgrade, there may be an momentary upturn in acquisitions… of a few of the (about to be) downgraded carriers by larger insurers with efficient ERM programs. The latter would benefit from the formers’ otherwise (presumed and tested during due diligence) sound organization and distribution chain. Two other factors that would trigger ‘forced mergers’ of weakened carriers are mentioned in the article; i.e. adverse reserve development and cat losses. The stronger ERM practices of the acquirers will be applied to the acquired, possibly (likely?) yielding an economic value gain through the merger. Otherwise, wise management will resist the urge to merge, to survive and thrive.
Adverse reserve development of (potentially) downgraded insurers in the next few weeks will be interesting & informative to monitor and compare to other carriers on a ratio-to-surplus basis. Annual reports are likely to glance over that ratio due to a focus on cat losses relative to premium and surplus… as a means of downplaying bad results for 2017.
There are so many states who keep enacting huge YoY decreases in workers compensation rates, for example, and carriers all over the country keep buying up premium, with no adjustment to how they reserve and no movement on the types and quantities of credits they are issuing.
AmTrust has sought capital infusion twice already and there are rumors of them approaching potential suitors that could take them private. They are notorious for pricing their risks too low and under-reserving, as well. It will almost certainly bite them in the butt eventually. They will join the garbage heap of so many other once-great carriers if they do not attempt a course correction and stop chasing rates to the bottom of the barrel.
Marsh’s Protective Insurance is the next one to have problems, I am calling it now. They features a mass exodus of C-level execs a couple of years ago and have now gone all out in an effort to keep as many accounts on the books, profitable or not. I am seeing them offer credits of 20% to insureds with high hazard exposures to keep them, or they move them to their “Tier 1” paper Sagamore Insurance Company.
My best guess: 2018 is a huge year of flux. I am willing to bet either several carriers refile their Loss Cost Multipliers higher, or you are going to see more Guarantee Ins Co, Dallas National (Freestone), Tower Ins types of situations soon.