Reinsurance Issues Mulled At CPCU Session
By Steve Tuckey
NU Online News Service, Oct. 25, 1:37 p.m. EDT, Los Angeles?A panel of industry experts at this week's annual CPCU Society meeting here voiced both concern and optimism about the reinsurance market.[@@]
Joseph Dillon, chief underwriting officer for commercial insurance for San Francisco-area-based Fireman's Fund, discussing the effects of catastrophes, recalled the gloomy days after the 9/11 terrorist attacks.
"We could not get concurrent terms with policies that we are required to offer by state regulation," he said. "Since the reinsurers were not regulated, we were left virtually bare."
And despite the fact that Mr. Dillon remains optimistic that reinsurance cover will be available at a reasonable cost, he said he is already in the market for the '05 season, even though his treaties do not expire until April 1 and July 1.
"We are afraid that catastrophe could become an issue and we want to get ours locked up," Mr. Dillon said.
Todd Hess, chief risk officer for the Los Angeles-area-based Swiss Re Underwriters Agency, said he sees the reinsurance industry at a crossroads.
The hard and soft pricing cycles of the past "have been a function of market share mentality trumping analytical indications," Mr. Hess said.
On the property catastrophe side, while the four storms may seem unusual, from a modeling perspective they were "not unimaginable," he noted.
"But on the casualty side, the results come out many years later, and in the ensuing time a whole lot of business has been written," he said.
He noted that the forced exit of Zurich-based Converium from the North American market resulted in forced reserve increases for casualty lines of business.
James Farmer, vice president of operations for State Farm, compared this year's catastrophe season to the one 12 years ago when, he said, the losses may have been roughly the same in dollars, but were nowhere near the same in overall impact.
"If you remember back in 1992 in the aftermath of Andrew, it took a long time for capital to flow back in," Mr. Farmer recalled. "There were some Bermuda start-ups. London was out of play for a while. It happened, but it did not happen very quickly."
After the Sept. 11 attacks, the capital flowed in much quicker and almost matched the capacity that was lost.
As for the '04 hurricane season, Mr. Farmer said any softening in the property catastrophe market will stop.
"But there will not be this huge increased reaction we had post-Andrew," he said. "So I am optimistic."
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