Most insurers think the size of the program business market will not amount to more than $20-to-$30 billion in gross written premium this year, according to an e-mail survey conducted by Guy Carpenter.
The reinsurance brokerage firm, a member of New York-based Marsh & McLennan Companies, made the finding in its third annual survey of domestic insurance companies that write specialty program business through program administrators.
According to the survey, 50 percent of carriers believe the program business market will be in the $20-to-$30 billion range, compared with 44 percent in last year's survey. Those carriers who believe the market will stand at more than $30 billion dropped from 40 percent in the 2006 survey to 23 percent.
Twenty-seven percent of carriers surveyed believe the market will be less than $20 billion, up from 16 percent last year.
The number of carriers surveyed who said they describe themselves as writing specialty program exclusively also dropped from 65 percent in 2006 to 48 percent.
However, Carl Bach, senior vice president and head of Guy Carpenter's program manager solutions specialty practice, said in a statement: “Change and evolution are the watchwords in the specialty programs marketplace. We are seeing a continued flow of new capital into this market segment, resulting in the emergence of new markets as well as ongoing merger and acquisition activity.”
He said that based on the survey results, it is expected that carriers operating in this market will be interested in most program opportunities. He added that the key to success between program administrators and carriers “is a clear understanding of carrier requirements, program needs as well as program administrator experience, expertise and servicing capabilities.”
When it comes to premium growth and expansion, the survey found carriers are looking to both new and existing program administrators to deliver. Seventy percent said they expect growth through adding new lines of business. The same percentage expects growth through expanding territory, and 44 percent see growth through acquisition.
Among the other findings:
o In the workers' compensation line 48 percent of the respondents are looking to grow their books, compared with 40 percent in 2006. In umbrella liability only 26 percent of the respondents expect growth, versus 65 percent last year.
o Geographical preferences: consistent with the 2006 survey, 65 percent of those surveyed said they prefer regional programs as opposed to 26 percent for national and only 9 percent for single-state programs.
o Claims administration: carriers surveyed indicated they are becoming more flexible in their use of third-party administrators to manage claims. While many still require or prefer that claims be handled internally, others appear comfortable utilizing TPAs.
The survey is available at www.guycarp.com. Printed copies are available by contacting Guy Carpenter at marketing@guycarp.com.
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