LAHAINA, HAWAII–There will be a solution to the insurance scarcity hitting property risks along the Gulf of Mexico, but it will take time and market adjustments to find the correct rate for the risks, according to wholesale brokerage experts.

Their observations came during a press briefing with the leadership of the American Association of Managing General Agents during its 80th annual meeting held here.

“First and foremost, this is a crisis,” said Tom Albrecht, president and chief executive officer of The Barclay Agency in Montgomery, Ala., and soon to be president-elect of the AAMGA. “The first reaction from a lot of carriers has been to withdraw, but they will come back over time.”

How long that will take, however, is a question that can't be answered at present, he said. Mr. Albrecht did suggest it could take as long as two years before insurers come back.

He noted that it has been the traditional job of wholesale agents to bring markets back, to find solutions when there is a need, and he was confident that a solution would be found, but not immediately.

“We're going to face some hard times for a while,” added Mr. Albrecht.

The crisis along the Gulf region involves carriers withdrawing from the catastrophe property market throughout the region. Agents from Florida to Louisiana are finding it difficult to place risks or encountering prices for those risks that have dramatically increased.

Francis G. Johnson, president of Johnson & Johnson Inc. in Charleston, S.C., and the current president of the AAMGA, said the situation requires some thinking outside the box, bringing in independent agents, regulators, companies and wholesale general agents to come up with a solution.

There is capital out there to cover capacity, he went on to say, and underwriters are writing, but the ultimate question is whether the price will be tolerable to the consumer.

“Free markets are the best way to go,” said Mr. Johnson in response to a question about insurers' arguments that part of the crisis in Florida, at least, has to do with the state's suppression of rates.

“The more deregulation we have, [the more rates will be allowed] to fall where they should be, and the rates will fall to where they need to be,” Mr. Johnson commented.

Scott Anderson, executive vice president of Concorde General Agency in Fargo, N.D., and incoming AAMGA president, asked rhetorically, “Do we want to throw our money in somewhere where prices are artificially low?” Without government rate suppression, he said, “I think there would be more capital out there.”

When asked if another severe hurricane season would have the effect of a general increase in rates, Mr. Albrecht said he was surprised it did not occur after last year. But the group would not speculate as to what effect another severe hurricane season would have.

To balance their book of business and mitigate losses, Mr. Johnson said some wholesale brokers are getting away, in some instances, from being pure writers of property and moving into casualty lines.

On the issue of regulation, the leadership said they were universally opposed to current proposals in Congress to create a federal insurance regulator, saying that the state system, despite its shortcomings, is a better system to deal with the myriad of risks insurers underwrite.

Mr. Anderson pointed out that the very nature of the property-casualty business–dealing with different regions of the country with their own unique risks–makes it impractical for one federal regulator to regulate the whole industry effectively.

“We know there needs to be some uniformity in state licensing,” said Mr. Johnson, “but to see someone appointed outside of the state regulators would not be the best way to go.”

Mr. Anderson, who becomes president later this week, said the AAMGA association is becoming a recognized voice on insurance topics in the nation's capital, something that is the culmination of years of branding by the association to elevate its reputation outside of the wholesale insurance world.

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