Three subjects dominated discussions among executives and riskmanagers in Philadelphia at this year's Risk and InsuranceManagement Society convention: pricing, Business Interruption andCyber risk.

Regarding pricing, Mario Vitale,CEO of Aspen Insurance, says there is clear evidence the market isfirming, but he notes that no one is using the term “hard market”in their conversations about rate.

Last year's catastrophe losses and low-investment yields havetaken their toll, he says. However, the market is in a position nowwhere a major event could shift it from firming to hardening. Butputting an exact number on what size that loss event would have tobe to move the market is difficult, he adds.

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.

“I'd say we're transitioning to a more equitable market, if youwill—though how long that will last is anyone's guess,” says HankWatkins, president of Lloyd's America, when asked whether a hardmarket is on the horizon.

Jonathan W. Hall, executive vice president for FM Global, saysthere is a “sense the market is changing” and is firming. Thequestion right now, Hall says, echoing Watkins, is how long thatfirming will last, given the recent history in the marketplace ofpricing reaching a peak before sliding back down again, headds.

Hall notes that on some wind-property exposures, especiallyalong the Texas coast, there are some capacity issuesdeveloping.

“Insurers would like to see more rate increases,” observes 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 andblend the needs of the client and the underwriter with a creativeapproach to the product, you have met the market challenge,” saysKunney. “That creates an opportunity for us.”

Another issue of major concern is Contingent BusinessInterruption coverage. Executives say that the series ofnatural-catastrophe events overseas—flooding in Thailand, theearthquake and tsunami in Japan—has exposed the risk to companies'supply chains and the need to address that exposure.

Hall says risk managers have done a good job of understandingtheir Contingent Business Interruption risk (a shutdown of asupplier that can affect operations), but now they have to betterknow the threats to their total supply chain. That meansquantifying that risk and defining what the impact on operationswould be if a particular facility in the supply chain was lost.

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

Risk managers, he says, need to probe deeper into their supplychains “than anyone ever anticipated.”

Turning to Cyber risk, Christopher Keegan, Willis senior vicepresident of 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, he says, but excess continues to be soft.

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

Other corners of concern are arising from exposure to socialmedia, including such issues as defamation, copyright infringementand disclosure of private data.

Hall says FM Global has always provided coverage for these Cyberexposures in its policies, but with growing concerns over exposure,the company is paying closer attention to underwriting the risk. Hesays the company does not plan to remove the coverage from itspolicies, but it will be asking for a lot more information than inthe past.