ISO Boss: P-C Carriers Face a Battle For Survival
NU Online News Service, June 9, 4:31 p.m. EDT?Falling prices and intensifying competition threaten to reduce the number of surviving U.S. property-casualty insurers, the chief executive officer of a key insurance products organization warned an industry group yesterday.
The "biggest challenge facing many insurers may very well be survival itself," was the caution from Frank J. Coyne, chairman president and chief executive officer of the Insurance Services Office speaking at the Annual Insurance Accounting & Systems Association Conference in Las Vegas.
Mr. Coyne said the sector faces increased competition even as it continues to suffer from lackluster profitability and loss reserve deficiencies.
He noted that first-quarter data from the Washington-based Council of Agents and Brokers showed commercial insurance rates are now declining, and that increases in the Consumer Price Index for personal auto insurance were just 3.6 percent in the first quarter, falling from an 8.8 percent average rise in 2002.
The number of private insurance groups in the United States fell to just above 900 in 2002, from 1,300 in 1990. The 26 percent decline came about as many insurers left the market after becoming insolvent, Mr. Coyne said.
While the rate of insolvencies has slowed, the ISO boss said there is a "disturbing long-term trend in the number of property-casualty insolvencies.
Despite a market that firmed up in the past ten years, the p-c sector has suffered 36 insolvencies a year on average–far above the rate in the 1970s, Mr. Coyne noted.
He told his audience that mergers among strong carriers have allowed them to "ratchet up the pressure on their competition–ultimately driving more weak insurers into insolvency or the arms of stronger partners."
One strategy for survival, Mr. Coyne said is to employ the best available data and high-end analytics for solid underwriting and pricing. Additionally, he said, insurers will need "the fortitude to execute against core fundamentals as competition heats up in the weeks and months ahead."
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