Insurance Execs In Poll Say Their Firms Will Do Better In 2010

NU Online News Service, Sept. 24, 3:35 p.m. EDT

Insurance executives polled at a conference see their companies performing above general market expectations in 2010, but their overall industry view for the near future is less positive.

The group of 271 senior executives was surveyed by the KPMG consulting firm at its just concluded 21st Annual Insurance Industry Conference.

Forty-eight of those surveyed said they expect their company to perform ahead of expectations in the year ahead.

KPMG said this represents a much more bullish outlook than the results of its 2008 survey, when only 22 percent saw performance being better than expected.

Another 36 percent of this year's survey group thought their companies would perform at a level similar to 2009; just 16 percent said they see company performance being below expectations.

The executives continued to indicate that underwriting profit may be elusive in the next three years. 64 percent said they see only a moderate ability to increase underwriting profit, while 27 percent characterized the chance of increased profit as "weak."

Scott Marcello, partner, insurance industry leader at KPMG LLP, said "The period of the past 18-24 months has been very challenging for many insurers in terms of financial performance" and while the poll

found some optimism, executives clearly indicated "the industry still faces many risks and the uncertain economic and regulatory environment poses many obstacles to growth and recovery."

KPMG said insurance executives polled most frequently cited continued unemployment rates and increasing regulatory intervention as barriers to economic recovery.

While 31 percent of executives said they don't anticipate their company will need to access additional capital over the next 18 months, the scarcity and high cost of capital was cited as the third largest barrier to overall economic recovery.

In the event their company did decide to access additional capital over the next 18 months, 22 percent said the most likely source would be equity, while 17 percent said it would be debt.

But, despite the challenges surrounding access to capital, 73 percent of executives say they expect an increase in mergers and acquisitions when compared to the last 12 months.

Asked to identify the most significant challenges they face in the next three to five years, 30 percent of respondents cited the risk associated with adequately pricing insurance products to be the most significant, followed closely by credit risk, identified by 23 percent of the respondents.

When asked about their organization's view around the ongoing debate of financial regulation, executives offered mixed opinions as to the best plan.

Twenty-eight percent of executives support an optional change to a federal regulator, 25 percent opt to maintain the current state regulatory system but say some increase in regulation will be necessary, and 17 percent support a mandatory change to a federal insurance regulator.

Twenty-five percent do not support any change, and say increased regulation is not needed in the insurance industry.

Listing items they saw as most important for future growth, 17 percent mentioned product innovation, 15 percent customer focus and 14 percent redeploying capital.

Forty-five percent in the survey said their company has made changes to both their risk management processes and their risk appetite/tolerance as a result of the global financial crisis.