When over 30 top insurance executives gather in the same place to share views on key industry challenges, you expect to hear complaints about terrorism risks, natural catastrophe losses and pandemics keeping them up at night, but it was clear here that more traditional threats are still just as likely to prompt insomnia among CEOs.

Indeed, at the recent World Insurance Forum here, regulatory obstacles, return prospects and the viability of the business were clearly on the top of everyone's mind.

Such meat and potato operational concerns are not specific to the insurance industry, according to Samuel DiPiazza, global chief executive officer of PricewaterhouseCoopers. His firm's recent survey of 1,400 CEOs from all types of industries across the world revealed that as they look across borders for opportunities to access new markets, CEOs are most worried about inconsistent regulations.

“We expected them to say, 'We're not sure we can deal with…multiple languages,' [or] 'We've got lots of different cultures around the world that we're struggling with.' That isn't what they said. What we didn't hear was that terrorism worries them. It didn't come up,” he said.

Instead, echoing views repeatedly expressed by insurance executives at this biannual Bermuda forum, Mr. DiPiazza reported that almost two-third of the CEOs surveyed said the only thing that's going to keep them from succeeding in their quest for new markets is regulatory barriers.

During an earlier session, Martin Sullivan, president and CEO of New York-based American International Group, was one of many who pointed to operational and risk-related concerns among those that keep him tossing and turning at night.

Most notably, Mr. Sullivan–who was introduced as the CEO of the world's largest buyer of reinsurance–said he worried about the ability to collect on reinsurance claims. The AIG chief raised the issue in response to a question about whether the increasing concentration of capital in the reinsurance sector is good for the rest of the industry.

Mr. Sullivan and several other speakers referred to a January report by the Washington-based Group of Thirty (a private, nonprofit international group of 30 senior representatives of the public and private sectors that studies economic issues), which concluded that there isn't systemic risk from the reinsurance market.

“But one of the things that keeps me awake at night is what would have happened to this industry had [Hurricanes] Katrina, Rita and Wilma occurred [right] after 9/11, in October 2001. I just wonder what the outcome of the G30 report would have been then,” Mr. Sullivan said. “I think we would be facing possibly a different audience today, and the industry would be facing somewhat of a different challenge.”

He added that “as an industry, we have to be prepared for risks that we don't even know about.” As an example, he said that “one of the things I worry about constantly is [the question of] what are we writing today that is the challenge of the next year or five years hence? What is the next asbestos, the next silica? It's out there. We just haven't identified what it is.

Later, executives debated about hazard risks, offering different views about whether terrorism, pandemics or “the next asbestos” made them lose more sleep.

Brian Storms, chairman and CEO of Marsh, cast his vote for pandemic risk. “That's the most discussed and most worrisome issue that we're facing around the world. The speed at which it's traveling right now is remarkable,” he said. “That's the number-one issue that keeps me awake, personally and professionally.”

Mr. Sullivan said the continued threat of terrorism didn't just keep him awake from an underwriting standpoint. “It's the [question] of how do you keep the business running? What's the impact to the capital markets and business continuity?”

Lord Peter Levene, chairman of Lloyd's, said terrorism is the most difficult hazard to deal with, noting that while it is possible to model pandemics and natural disasters, with terrorism, “we've just got no idea when it's going to happen.”

Dr. Nikolaus von Bomhard, CEO of Munich Re, said that speaking as a reinsurer rather than a civilian, pandemics didn't cause him any loss of sleep. Like Mr. Sullivan, he said he worried about casualty risks for which “we already have exposure on our books, but we just don't know yet.”

“That, of course, would make us look dumb again, and that is what I hate,” he said. “With pandemics, with terrorism, we're working up and down the line all the time. We may not manage it yet. We may not ever manage terrorism, but we are on top of it.”

At a later session, the question came up again, as panel moderator Brian O'Hara, president and CEO of XL Capital, observed that seven of the 10 largest loss events occurred in the last four years, causing some paranoia among executives. However, when Mr. O'Hara asked what kept executives awake, they fixed their gazes past hazard risks, focusing on operational issues instead.

“If you can't sleep with the risk, you shouldn't take it in the first place,” said Stephen Catlin, CEO and deputy chairman of Catlin Group Ltd. “I worry about credit risk sometimes–about reinsurers who won't pay claims they should pay.”

Grahame Chilton, CEO of Benfield Group, said he spends time fretting over reputational issues. “Having built a reputation for advocacy for our customers, which is something we vehemently want to protect,” he said, the broking industry “destroy[ed] the very framework of trust it needs to be built on” in recent years, referring to the bid-rigging and contingency fee abuse scandals exposed by New York Attorney General Eliot Spitzer and others.

Robert Cooney, CEO of Max Re, said his greatest challenge involves deciding where the best opportunities are to deploy a limited amount of capital to achieve the greatest returns as a risk taker to get the best return–”and then, conversely, where do you pull back a little bit.”

“We're in the business for the long term, but that doesn't mean you have to keep the size of your bets the same if you think that margins are deteriorating in certain lines,” he said. “The opportunities in front of us are something I think more about than what we've got on the books, whether a storm hits or not.”

John Berger, president of Harbor Point, said he is most worried about “the underlying economics of our business.”

In both casualty or property lines, he added, “what we're all finding out is that…the tail is a lot thicker than we would like, whether because of increased frequency, severity or political situations like in Florida, where you just can't charge enough for the exposures.”

He said new legal trends, such as construction defect suits in California, are “costing billions of dollars” to the industry.

“Is there enough money in our business to make it work over time, or can you only get appropriate returns at a time of dislocation?” he asked, noting that the viability of the business is in question because of the inability to charge enough for the risks insurers and reinsurers are asked to take.

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What Keeps Insurer CEOs Up At Night?

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