Cycle Turn LoomingNot!
To The Editor:
Having recently addressed a group of relative newcomers to the excess and surplus lines business on the subject of market conditions, I was very intrigued by the analysis in your June 2 edition by Frank J. Coyne, chairman, president and chief executive officer of the Insurance Services Office Inc. in Jersey City, N.J. (See "Seven Lessons from History," page 19.)
Your magazine's cover catchphrase, "Cycle Turn Looming," drew me to the article. Rather than hinting at the inevitability of a market turn (as your tease suggests), I believe Mr. Coyne makes an extraordinary case of why, if anything, the market should only continue to harden.
Suggesting that it would take improvement in the industrys combined ratio from 107.2 in 2002 down to 92.2 for a 15 percent return on surplus will be overlooked by some. With the dramatic reductions in investment yield, there are those who would suggest a 15 percent return is unrealistic today. I would counter that, given the risk volatility of our industry, such a return is not out of order if we are to compete with other industries for capital.
As my career now spans over 35 years, I would hope to, just one time, see our industry behave intelligently and responsibly. Mr. Coyne closes with the question: "Will history repeat itself, or will insurers take advantage of current opportunities and write a whole new chapter?" I am hopeful our industry is much smarter this time and can, in fact, "write a new chapter."
Unfortunately, many will read your tease on the cover and not read the article. They could easily misinterpret that to say that ISO is forecasting a turn. I hope, instead, they will read and absorb the excellent article. They may realize that two years of price increases hardly corrects a decade of price-cutting.
John K. Latham
President
Markel Re
Glen Allen, Va.
Reproduced from National Underwriter Edition, July 7, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.
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