NEW YORK–While insurance pricing cycles show no sign of disappearing, new data sources and methods could ease their sting in the coming years, a panelist at an executive forum here said yesterday.
Speaking at the annual Property-Casualty Insurance Joint Industry Forum, Safeco Chief Executive Officer Paula Rosput Reynolds said advances in automated underwriting have made the kind of flexibility leading to sharp cycles very difficult to achieve.
"The kind of price movement we have seen lately has been based on the actuarial tables," Ms. Reynolds said.
Executives also cautioned that the impressive financial results the property-casualty industry enjoyed should be viewed in a 20-year perspective in which an underwriting profit was achieved in only two of the years.
Brian Storms, Marsh Inc.'s chief executive officer, said that insurance and other risk management decisions are not being made at the highest level in the chief executive's office.
He also noted an increase in the use of catastrophe bonds to cover large risk.
Pierre Ozendo, CEO for the Swiss Re Americas division, said he expects sales of catastrophe bonds, which rose to $6 billion last year, to more than double in the next ten years.
Mr. Ozendo said in the coming years catastrophe bonds will play a much larger role than reinsurance sidecars, the short-term special purpose funds set up by reinsurers.
The Swiss Re executive said he did not believe state or national catastrophe funds that have been proposed in the aftermath of the 2004-05 hurricane season provide a long-term solution for catastrophe coverage.
AIG CEO Martin Sullivan said he did not see the recent spate of allegations concerning improper corporate backdating of option packages as providing any serious challenges to insurers' solvency or profitability. Most of the suits have been in the form of derivate suits on behalf of all the shareholders rather than specific actions against directors and officers.
"Such suits have always been easier to settle," he said.
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