Buyers of risk protection should read insurance headlines skeptically, carefully study their options before making choices, and understand that the current insurance industry situation, in the wake of an AIG bailout, is fluid, leading brokerage representatives said.
Their remarks came during Part Two of RIMS' "Risk Management Strategies in an Unsettled Financial Market" webinar.
Joe McSweeney, president of the U.S./Canada Division of Marsh Inc., speaking to the state of the AIG situation, said clients have been asking many questions of Marsh, and he noted that people should be careful when relying on media reports for information.
Clients, he said, should lean on the fundamentals of the insurance business when making decisions, such as contract certainty and carrier selection.
For brokers, and how they handle the current market conditions, Mr. McSweeney said the AIG situation does not call for "a new set of tools and methodologies." Rather he said brokers should focus on a coordinated, methodical application of tools already at their disposal, based on their experience.
He also noted that the events surrounding the financial collapse of AIG are not the only drivers in the marketplace. Other factors are getting lost in the shuffle, he noted, and he pointed to a recent A.M. Best Co. rating firm report that stated first half 2008 U.S. property-casualty net income declined more than 50 percent.
Don Bailey, CEO of Willis North America, said buyers should understand that the current situation in the insurance industry is ever-changing. The way things look today, he explained, could differ significantly tomorrow.
He also said brokers and others should be careful about making broad "one-size-fits-all" statements to clients in conference calls. Now, he noted, is the time for up close and personal talks with buyers on an individual basis.
Mr. Bailey went on to note that events happening in the United States will have global ramifications, and that the world has, in effect, changed into a place where the impossible is now possible. He cited the circumstances surrounding the Merrill Lynch, Bear Stearns, and Lehman Brothers financial debacles as examples.
Answering a question from Bill Coffin, publisher and editorial director of Risk Management, about whether an optional federal charter could have prevented the need for a bailout of AIG, Mr. Bailey said he believes an OFC may not have prevented all of the problems, but it would have provided a more practical regulatory framework.
He said it also may have provided a more forward-looking view on regulation that could have mitigated the current situation.
Eric Andersen, CEO of U.S. Retail at Aon Risk Services, said he has always been a strong OFC supporter, but noted that state regulators did a good job of protecting policyholders during the last couple of weeks. He said he now steps back and considers that, at the end of the day, state regulators did their job.
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