Inland-marine insurers are faced with a thinning and agingtalent pool in a line of insurance that requires highly specializedindustry and insurance knowledge, according to a recent ConningResearch & Consulting report.

Additionally, this segment, which has consistently been thebest-performing medium-sized P&C line, is facing pressuresrelated to heightened competition and fewer available premiumdollars due to a flood of new entrants and impacts from the weakeconomy.

Regarding talent, Conning says inland-marine insurer operationsare typically staffed by individuals with “deep expertise in[specific industries] served by an inland-marine product and in itsinsurance exposures.”

However, Conning notes that insurers are cutting back onin-house training programs, and professionals are finding more workon their desks as the result of widespread industry layoffs.

Compounding the talent issues, inland marine has seen many newentrants who have noted the profitability in this line and arelooking for a slice of the pie.

“One potential effect of the formation of the new inland-marinewriters in the past half-decade is dilution of talent pools atexisting inland-marine insurers,” Conning says. “The high demandfor insurance knowledge and industry expertise to support the manyproducts in inland-marine underwriting, loss control and claims hascreated substantial demand for experienced practitioners with goodtrack records.”

Additionally, the available premium in the segment is shrinkingdue to economy-related issues affecting inland marine's two biggestlines: construction and trucking. For construction in particular,Conning notes new insurers were lured into the market during theconstruction boom of 2000-2006. However, the bubble that burst in2008-2010 has left insurers battling over less premium.

Other inland-marine lines, such as fine art and yachts, havealso seen new entrants, but Conning notes that these traditionallydesirable markets have faced challenges “as the recent financialcrisis wreaked havoc on the high-net-worth sector—and particularlyon certain classes of luxury goods and property.”

Still, even with the challenges, Conning says inland marine wasstill the best-performing medium-sized P&C line in 2010, withdirect-written premium of $13.2 billion. Combined ratios haveaveraged between 10 and 15 points lower than those of the broaderP&C industry “for several decades.”

Digging deeper into inland-marine results, Conning says the mostprofitable segments are for personal inland-marine products andsome of the more-specialized commercial inland-marine classes.“Larger size or scale was not found to be correlated with superiorperformance, as many of the most successful inland-marine insurerswere not in the upper tiers of the premium league tables,” Conningnotes.