NU Online News Service, Dec. 8, 2:45 p.m. EST

NEW YORK—The insurance industry, with its increased use of better tools to assess risk and allocate capital, might see shortened market cycles than it is used to, according to an executive from Chartis.

The perspective came from John Q. Doyle, chief executive officer of global-commercial business for Chartis, at the 22^nd Annual Executive Conference produced by The National Underwriter Co. and Summit Business Media.

Doyle says Chartis has been talking internally about “micro-cycles.”

As tools insurers use to look at risk get more advanced and accurate, companies will be able to deploy capital shrewdly, he says.

This could produce “shorter, flatter cycles” with “less up and down” fluctuations, unless of course, there is an extraordinary, well-timed event.

The view is not shared by all. Speaking at the Goldman Sachs U.S. Financial Services Conference, W.R. Berkley CEO William R. Berkley said it is “unlikely” that the cyclical nature of the industry has been minimized by analytics.

If he were to believe that, Berkley says, it means companies “shouldn't have had the [reserve] redundancies that they've come out with over these many years.”

“I don't think anyone has such brilliance,” Berkley adds. “They should have it, but they don't.”

Though industry capacity remains strong and the economy continues to affect the balance of supply and demand, Doyle says price increases are being seen, which reflects “where we're headed as a business.” Insurers are getting smarter about risk, he says.

Information is better, leading to improved underwriting discipline. There is a “greater transparency around risk” and there are “far better tools to analyze risk,” Doyle adds.

Doyle says American International Group Inc., for which Chartis is the property and casualty unit, has invested a lot of time and money in tools to improve risk selection, pricing and underwriting. The company can use its size and scale—its experience in different markets throughout the world—in predictive modeling, Doyle adds.

The process has been an “expensive and exhaustive,” Doyle says, because the company is collecting data in various languages and cultures and adhering to different laws about privacy.

“It impacts every aspect of the organization,” Doyle says.

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Traditional Market Turns Could Give Way to &lsquo;Micro Cycles,&rsquo; Chartis Exec Says

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