As the world becomes increasinglyprecarious, new risks have either not been addressed or have beenexcluded by the industry, says insurance industry legend Patrick G.Ryan.

“We haven't been as responsive as we need to be,” the chairmanand CEO of Ryan Specialty Group said at Advisen's ManagementLiability Insights Conference in New York in late September.

However, through innovation and a better spreading out of thesenewer risks—Cyber and Contingent Liability, for example—Ryan saysthe surplus-lines sector is in line for expansion.

“With every adversity is the seed to equal or greateropportunity if you search for it and figure out ways to solve it,”he said.

Ryan's rallying cry to the industry had much to do with hisperception that it has yet to find ways to “solve the needs notbeing solved.”

The percentage of the gross domestic product (GDP) spent oninsurance is declining, he noted.

Right now, large companies with high risk can't get insuranceand are taking on those risks themselves. “We can address that,” hesaid. “There is opportunity [there]. These are not esotericrisks.

“The future of this business is going to the innovators,” headded.

The founder of insurance-brokerage Aon would not accept cost orthe soft market as barriers to innovation. When asked what he wouldtell companies that believe the opposite, he said: “You're lookingat it wrong. Product development can be pretty inexpensive. What'sexpensive is not to innovate.

“You've got to invest [in innovation] or you're not going togrow,” he noted. “I never believed you can't grow in a softmarket.”

Innovation “best comes from the distribution side—the peopletouching the client,” he said, adding that aspect of insurance isalso changing.

Retail brokers, Ryan noted, have decided to do business with farfewer wholesalers—and in the meantime, wholesalers have gottenlarger. Ryan doesn't believe the biggest of the wholesalers willget larger, but he does anticipate increased merger and acquisitionactivity at the regional and local wholesale level.