Top professionals on both the P&C and Life sides convened inTimes Square at the close of 2013 to network, discuss emergingglobal risks and opportunities and hear executive panelists weighin on pressing issues facing the insurance industry during the 23rdAnnual Insurance Executive Conference, sponsored by Ernst &Young LLP.

The two-day event, held on Dec. 17 to 18, was hosted by theNational Underwriter Professional Network, a Summit ProfessionalNetworks subsidiary.

A keynote address from William Wheeler, president of TheAmericas division for MetLife, Inc., kicked off this meeting ofminds that also featured headlining speakers from The HanoverInsurance Group, AIG Property Casualty, Munich Re and XL Group.

Attendees were treated to insights shared by Dr. Robert Hartwig,president of the Insurance Information Institute; George Brady,deputy secretary general of the International Association ofInsurance Supervisors; Murli Buluswar, chief science officer of AIGand leader of its new Science Team; Sam Ford, director of socialmedia strategy firm Peppercomm; and Bill Coffin, group editorialdirector of National Underwriter Life & Health and NU P&C,who curated the conference's wide spectrum of panels.

AIG's Hancock Tackles Emerging Risks, NFIP andTRIA

Peter D. Hancock, who became chief executive of AIG's globalP&C business when it split into separate commercial andconsumer groups, shared his worldwide view of the industry's truehurdles in 2014.

“History doesn't repeat itself; it rhymes,” quoted Hancock, CEOof AIG Property Casualty, drawing a parallel between Mark Twain'swords and the changing global risk landscape.

In fact, one ancient remnant made the first impact of its kindon AIG Property Casualty last year in the form of a meteorite claimfiled by a Siberian warehouse insured against earthbound spacedebris.

Hancock was speaking on a panel outlining emerging risks andopportunities within insurance. He cited climate change, cyberinsurance, alternative capacity and public-private risk transfersas trends watched by AIG's P&C executives.

Cyber attacks also rated high on Hancock's list as a “real riskthat is massively underinsured” despite the significant risks tobusinesses great and small. Some 525 breaches occurred so far in2013, he noted, affecting companies required to contend not onlywith various privacy and notification laws in nearly every state,but also with impending protocols for government action.

Hancock said public-private risk control mechanisms may ensnarethe insurance industry and wider economy as the National FloodInsurance Program “is renewed every year despite its costs and thedistortions it creates to the building industry” by allowing realestate development in flood-prone areas.

Tapping into Emerging Markets

World Bank consultant Rodney Lester gave tips on ensuringsustainable insurance growth in the fertile but foreign soil ofemerging markets.

Emerging markets (EMs) are the seeds of the future, accountingfor most of the world's growth—and Lester, senior consultant withthe World Bank, focused on the opportunities and risks ofcultivating them.

For example, in Latin America, increased economic developmentand improvements in wage levels and living standards has madecapitalizing on this region a necessity, not a luxury, forinsurance organizations.

Other indicators of a good regional opportunity are a country'slevel of private credit and infrastructure development, as well asa healthy regulatory system that discourages potentially insolventinsurers. But not all EMs are created equal—and great care must betaken in the development of an action plan appropriate to theregion being considered.

“You must carefully think through your entry tactics once yourtarget markets have been identified,” Lester added. “You can'tenter an emerging market with a traditional insurance model.”

A 'ginned-up' way of thinking

Regulatory scrutiny that followed the financial crisis isforcing insurance CEOs to spend an inordinate amount of time oncompliance to solve problems that do not exist and satisfyregulators who “don't understand the industry,” said HanoverInsurance Group's chief executive.

CEO Fred Eppinger said the need to view insurance companies likebanks is a “ginned-up” one, and as a result, “I spend two to threetimes more today on regulatory issues than before.”

Although the low-yield environment has driven some insurers totake on more investment risk, he said one of the biggestdifferences between insurers and banks is insurers' small scale ofdebt and leverage, which helped the industry weather the recessionwithout putting companies out of business.

“What problems are we trying to solve?” asked Eppinger, statingthat the industry is well-financed and has substantial levels ofcapital. “I worry that we'll change a system that works, for thesake of consistency.”

U.S. Regulators Taking a Cue from InternationalOrgs

Deputy secretary general of the International Association ofInsurance Supervisors George Brady discussed the task of leadingincreasingly interconnected economic systems toward commongoals.

Overseas regulatory bodies are increasingly guiding the work oftheir U.S. counterparts, Brady said, while the association'sinfluence in developed and emerging markets also is growing.

Brady said the IAIS, a voluntary membership-driven organizationof insurance supervisors and regulators from more than 190jurisdictions in more than 140 countries, aims to use the increasedinteraction to “bring global solutions to global issues.”

Among the IAIS' initiatives is a confidential web portalenabling insurers to exchange information, and a methodology foridentifying systemically important financial institutions. It alsostands behind Solvency II, the EU directive to regulate insurancecompanies in order to ensure their solvency.

“The U.S. is becoming more cooperative internationally at a timewhen there has been a great deal of activity to guard against arepeat of the [2008 to 2009] financial crisis,” Brady added.