Katrina Could 'Define' Industry

"There hasn't been one positive headline [about insurance] since Katrina," Joe Plumeri, chairman and chief executive at Willis Group Holdings Ltd., told National Underwriter here during the Reinsurance Rendez-vous de Septembre.

"So far, it's been whether [losses have been caused by] wind or water damage," as a large portion of flood losses may not be covered by private insurers, he added.

Instead, Mr. Plumeri said he would prefer to see a headline on the order of: "Insurance Industry Poised To Help Rebuild New Orleans."

Mr. Plumeri told a packed room of reinsurance executives here that "how the industry behaves collectively will define us." He said the defining moment for Lloyd's of London was in 1906, when it "seized the moment respective to the San Francisco earthquake." This created a favorable legacy "that still follows Lloyd's," he added.

The insurance sector is vital to the economy, he explained, "and it will make the restoration of New Orleans possible."

However, he wondered, "how much time will be spent in courtrooms" with insurers litigating claims to contest coverage, thereby generating more negative publicity for the industry.

As for total Katrina losses, the "higher end of whatever the [damage] predictions are, is probably accurate," he noted, with estimates thus far ranging as high as $60 billion. "I think it looks, unfortunately, very bad."

As for Katrina's effect on pricing and capacity, he said, "I don't set rates. I'm not on that side of the equation."

However, he conceded, "you've got to ask if [Katrina] will have an impact on whether the rates go up or down–certainly it should stop them from going down. What it does for reinsurance and the retro[cessional] market remains to be seen."

Quotebox: (with Plumeri mug)

"There hasn't been one positive headline [about insurance] since Katrina. So far, it's been whether [losses have been caused by] wind or water damage."

Joe Plumeri, Cchairman & CEO

Willis Group Holdings