The range of opportunities and challenges facing the wholesale insurance market are vast and consequential — so much so that in 2014, the American Association of Managing General Agents (AAMGA) created a specialized Emerging Issues and Trends Committee to study these and other topics.
This industry-wide, interdisciplinary group of professionals is solely focused on the future, conducting a survey to draft an annual heat map of these risks in collaboration with risk management and insurance departments at universities all across the country. Taking what has been learned, we have provided the industry with valuable, practical information on how to best understand the risks, educate our members and diligently prepare to underwrite them.
This means exhaustively examining those matters that promise to alter the way we do business, and also those that will impact our marketplace. The goal is to help wholesale insurance professionals address fundamental issues, such as:
Determining the need or desire to write the risk;
Developing a cost structure for such risk;
Drafting the proper manuscript form or using existing forms to ensure the risks are properly secured; and
Identifying risks the wholesale insurance market may not be willing to undertake.
The data from our industry-wide survey showed concern — as well as promise — on several immediate issues. Those issues identified for the highest probability of altering the insurance landscape with the most severity in the shortest period included:
Increasing cyber exposures: Recent, high-profile cyber security breaches across several industries have made clear the risk to businesses and organizations of all kinds and all sizes, demonstrating the increased vulnerability of confidential data and presenting challenges and opportunities for risk management professionals.
Increasing consolidation: Consolidation makes it more difficult for entrepreneurial smaller firms to compete and limits options for insureds and markets.
Widening technology gaps: As costs, complexities and lack of technological expertise increase, many firms are struggling to define and implement their technology roadmap.
Increasing challenges in workforce dynamics: A large segment of the workforce is beginning to move into retirement. One result is a gap in attracting and retaining new talent and transferring institutional knowledge and expertise.
Standard markets infringing on E&S market: Given the investment climate and demand to secure market share, standard markets continue to dip into Surplus business, putting pressure on traditional E&S markets.
The new year promises more, not less, of these challenges and opportunities, and the industry must be prepared to meet them head-on. When the AAMGA Emerging Issues and Trends Committee continues its important work over the coming years, and prepares its 2017 heat map, we will no doubt find these and other as-yet-unidentified matters facing our industry in search of solutions.
For more information, and to read about the committee's efforts and white papers of trending issues impacting insurance, visit eit.aamga.org.
Bernd G. Heinze, Esq., is executive director of the AAMGA, which represents more than 500 premier members of the international wholesale insurance distribution network and is headquartered in King of Prussia, Pa. Opinions expressed in this article are the author's own.