NU Online News Service, April 23, 12:00 p.m.EDT

PHILADELPHIA—Three subjects appeared to be most prominent indiscussions between executives and risk managers in Philadelphia atthis year's Risk and Insurance Management Society meeting: price,business interruption and cyber risk.

Last week, National Underwriter sat down withinsurance-company and brokerage-firm executives attending theconference inPhiladelphia to discuss these topics.

Regarding pricing, Mario Vitale, chief executive officer ofAspen Insurance, says there is clear evidence the market isfirming, but he says no one is using the term “hard market” intheir conversations about rate.

Last year's catastrophe losses and low-investment yields havetaken their toll, he says, and the market is in a position where amajor event now could shift the market from firming to hardening.But putting an exact number on what that loss event would be isdifficult, he notes.

Capacity remains strong, Vitale says, but reserves are seriouslydepleted, adding to the pressure to raise rates.

One sign the marketplace is changing is that more business isflowing back into the excess and surplus lines market, says Vitale,with submissions in that marketplace up by 25 percent in somemarkets.

Jonathan W. Hall, executive vice president for the insurer FMGlobal says there is a “sense the market is changing” and isfirming. The question right now is how long that firming will lastgiven the recent history in the marketplace of pricing reaching apeak before sliding down into soft-market conditions again.

Hall notes that on some wind-property exposures, especiallyalong theTexascoast, there are some capacity issues developing.

“Insurers would like to see more rate increases,” says MarcKunney, president of Integro USA, a unit of the insurance brokeragefirm Integro in New York. However, clients are still under pressurefrom the economic downturn and there are limits to how much theyare willing to spend on insurance.

“If you can bring different solutions to the table and blend theneed of the client and the underwriter with a creative approach tothe product you have met the market challenge,” says Kunney. “Thatcreates an opportunity for us.”

Another issue of major concern is contingent businessinterruption. The executives say that the series ofnatural-catastrophe events overseas—flooding in Thailand, theearthquake and tsunami in Japan—have exposed the risk to companies'supply chains and the need to address that exposure.

Hall says risk managers have done a good jobof understanding their contingent-business-interruption risk (ashutdown of a supplier that can affect their operation), but “nowthey have to do a great job and need to know the threats to theirsupply chain.”

That means quantifying that risk and defining the loss of aparticular facility in their supply chain to their operation.

Kunney says that risk managers need to go beyond their primarysuppliers and look at how the loss of “suppliers to the suppliers”can affect operations.

Risk managers, he says, need to “reach more than anyone everanticipated.”

Turning to cyber risk, Christopher Keegan, Willis senior vicepresident, executive risks—E&O and eRisk, says insurers areseeing more claims from the broad coverage they issued in the pastand are tweaking terms and conditions.

Here too, because of losses, there is a push for rate on somecoverage, but excess continues to be soft, he says.

Where once the concern was over credit-card theft, risk managersare finding other areas—such as a computer bug or programingerror—that could shut down an operation and set in motion supplychain disruption.

Other corners of concern are rising from exposure to socialmedia that raises the issues of defamation, copyright infringement,and disclosure of private data.

Hall says FM Global has always provided coverage for these cyberexposures in its policies, but with the growing concern overexposure, the company is paying closer attention to underwritingthe risk. He says the company does not plan to remove the coveragefrom its policies, but it will be asking for a lot more informationthan in the past.