RMs Advised: Get Busy On Jan. 1 Renewals

“Get into the market very early” for Jan. 1 renewals.

That the message a broker executive delivered to risk managers gathered for the Risk and Insurance Management Society New York Chapter October breakfast seminar.

“The people who are there first will get the capacity first,” said Michael OHalleran, president and chief operations officer of Chicago-based Aon Corporation, adding that he believes that “underwriters will be fair.”

The reinsurance market has had a dramatic impact from Sept. 11 that he likened to “a deer in the headlights,” because very little is getting done, people are waiting to see where their capacity will come from and they are “sitting on renewal terms,” he said. “I predict that most reinsurance treaties will not be completed well into the first of the year.”

On top of this, he said there is an issue with solvency. “Even though the NAIC has said the industry has enough capital, our issue is that maybe thats the case, but the reality is that the liquidity issue could become quite dramatic.”

Mr. OHalleran said he is “optimistic about the future” as well as the industrys ability to find solutions, because “thats the business were in.”

Other industry executives agreed that the insurance industry is indeed resilient and will come out ahead after the recent terrorist attacks on Sept. 11. They added, however, that it is important that the government assists with a terrorism reinsurance facility.

“The industrys losses are outside of comprehension,” said Edward Noonan, Chairman and chief executive officer of American Re in Princeton, N.J. “We never modeled an event involving so many types of coverage.”

“This is the perfect storm at worka lot of factors are coming together. This is a climate we havent seen since 1984,” he said.

He said its “critical for the government to step in on terrorism,” referring to recent efforts by the industry and the government to create a federally-backed reinsurance facility for terrorism risks. “[Terrorism] is a risk we cant take” at the present time, he said, because “we dont know how to price it.” Although over time, he added, pricing the risk will not be a problem for insurers.

“Were going to see a marketplace that will be very, very difficult in terms of how we get capacity, how we build capacity, how we put terms and conditions together, and how we look for alternatives to deal with this,” he said.

Thomas Motamed, executive vice president and chief operations officer, Chubb Group of Insurance Companies, Warren, N.J., observed that because of Sept. 11, “people now realize that insurance is essential to the economy.” The events of that day “will affect every insurer and customer in the world.”

He concluded that insurers and agents must focus on providing the best possible protection for customers. “Our business is about turning questions about price into conversations about value and coverage,” he said.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, November 5, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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RMs Advised: Get Busy On Jan. 1 Renewals

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