Market Pricing In ?Crisis' AAMGA Execs Say

"We are not operating in a hard market but one that is in crisis," said Julian James, director of the worldwide markets division at Lloyd's in London.

He said that the cycles are caused by the thinking of insurers to seek market share when profits are high from investment sources and to increase rates substantially when those profits wane. These cycles are "doing damage to our industry" he said, and need to be halted.

The industry needs to return to its core competencies where companies, managing general agents, and independent agents concentrate on their individual disciplines and do not enter into one another's territory to make some money and leave.

Mr. James added that the industry needs to continue on the course it began two years for the next five years to "put us in better shape."

His observations were made during an executives panel discussion that also included Jeff Post, president and chief executive officer with Fireman's Fund; Kevin Smith, president and chief operating officer with Northland Insurance Co.; and R. Max Williamson, president of Scottsdale Insurance Company.

Supporting Mr. James' comments, the other executives observed that the current insurance market is in bad shape and needs to improve its standing financially.

Mr. Post said the "sands are still shifting in the insurance marketplace." Unlike past hard markets this one is a "perfect storm" in that severe losses, an out of control tort system, poor underwriting results and losses in the stock market have conspired all at the same time to force carriers to underwrite for profitability.

Mr. Smith noted that there have been some improvements in losses, the "ugly specter of prior year loss developments" continue to haunt the industry. Despite the addition of $33 billion in added reserves over the past two years, the general observation is the industry remains under reserved, he said.

The insurance industry still needs to do more to become healthy, said Mr. Williamson, despite improvements in loss ratios. He said he felt the current round of price increases would last into 2005 and then "plateau" from there.

Later, during a press briefing with the current, past, and president-elect of the AAMGA, they echoed the comments and observations of the company executives earlier that day.

"We have to stop thinking we are in a hard market," said Robert S. Giles, past-president of the association and president of Midwest General Agency, in Eau Claire, Wis. "This is ?the' market. We can't let the ugly head of chasing market share come back and drive rates down again."

"It's a crisis market," said Ronnie C. Moore, president of AAMGA and president of The Southern General Agency, Inc. in Bowling Green, Ken.

"If we as a group can't make a good profit we should not be in this business," observed Joe Hutelmyer, president-elect of AAMGA and president of Seaboard Underwriters, Inc., in Burlington, N.C.