NU Online News Service, Feb. 3, 3:03 p.m.

NEW YORK—The insurance cycle is not dead, and thereturn to a hard market could come without a multibillion-dollarcatastrophic event driving the turn, a broker executive saidyesterday.

Brian Duperreault, president and chief executive officer ofMarsh & McLennan Companies in New York, made the assertionsduring a keynote luncheon address at the 2011 D&O Symposium ofthe Minneapolis-based Professional Liability Underwriting Societyheld in New York yesterday.

“We will see a market shift, and the catalyst does not have tobe a major event,” said Mr. Duperreault, who revealed that he hasseen several cycles over a career in the industry that has spannednearly 40 years.

Recalling the 2001-2003 hard market, he said that whileinsurance industry losses from the 9/11 attacks had enormous impacton the market conditions, “even before 9/11 exhaustion had creptinto the market. Insurers were at the end of their rope withdepressed pricing. The mood was bad [and] at some point people justgot tired.”

A typical scenario had underwriting leaders saying, “I’m notlowering prices anymore. Get out of my office. Just fix it.”

Mr. Duperreault said, “You can’t underestimate the impact of themarket psyche. I have come to understand that a hard market may beaccelerated by a catastrophe or other major event, but it must[start] in a less obvious place—the mindset of the market.”

Supporting his view, he said that if any event should haveturned the market, it was the Great Recession of 2008 and globalfinancial meltdown.

It didn’t. “The market just wasn’t ready,” he said.

Is the market psyche reaching a point that could bring about ahardening?

“It may not be [there] today, but we’re all getting tired. So interms of timing, I’d say it’s sooner rather than later,” Mr.Duperreault predicted.

Imparting some of the lessons he said he taught to underwriterswhen he worked at insurance companies, the former CEO of ACELimited said that “the best companies see soft markets asopportunities” to get better and smarter “than the other guys,” andthey also recognize “there can be profit in saying no” tounderpriced risks.

Speaking directly to the D&O insurance professionals inattendance at the gathering—which included underwriters, brokersand lawyers—Mr. Duperreault suggested that a healthy dose ofintuition needs to be used in conjunction with analytical tools tounderwrite this particular line profitably.

“Hurricanes are unpredictable, but people are even more so,” hesaid, noting that D&O insurance underwriting involves trying to“gauge human behavior.”

To sort out the good guys from the bad guys—to determine whichrisks to write—“you have to ask yourself, ‘Can I trust this brokerand this client? When I evaluate risk, am I doing so by combingthrough paperwork, or am I looking someone in the eye,’” he said,giving the basics of profitable underwriting.

“Intuition and perception” can still play a significant role indetermining what business to write, he said, urging underwriters tobe realistic about limitations of modeling tools.

“There’s no substitute for this kind of experience,” hesaid.