Last week, I assessed my predictive prowess by reviewing how accurately I'd foreseen the top stories of 2008. Since there were more hits than misses, I feel emboldened to guess at what might be in store for the industry in the year ahead.
My crystal ball came up with the following prophecies. Feel free to write me with your own.
1 AIG's Fire Sale Comes Up Short! American International Group will continue to struggle against the restraints imposed by meddling members of Congress as it sells more subsidiaries at bargain prices to pay off its federal bailout loan. I fear AIG may need more time–and, what's worse, more taxpayer money–before this nightmare ends.
2 As The Market Turns! Commercial insurance prices will bottom out, but outside of D&O, E&O and cat-exposed property coverage, rates will not rebound as sharply as the industry hopes. There is still too much competition in a contracting economy, and troubled carriers are pricing aggressively to overcome reputational risks and maintain market share.
3 Obama To The Rescue! The shrinking economy will make it nearly impossible for insurers to boost their top lines in the first half, but Barack Obama's stimulus package–particularly his plans for massive infrastructure programs–will spur rapid exposure growth in the summer and fall, to the benefit of a multitude of insurers.
4 Is There A Doctor In The House…Or The Senate? Health care reform will not pass in President Obama's first 100 days, but it will remain a top priority despite the recession, and Congress will pass a comprehensive plan before year's end. While the battle will be fierce, given the powerful interest groups involved, I expect a much smoother legislative process than the debacle we endured under then-First Lady, Hillary Clinton.
5 Noah Gets Coverage, But Only For Floods! The National Flood Insurance Program will be reauthorized for three years just before its scheduled March 6 expiration. However, while Congress will increase coverage limits and add a business interruption option, it will not expand the program to include wind damages.
6 Who Let The Cats Out? Congress will not establish a National Catastrophe Fund to back up state insurance facilities, despite support for the concept expressed by Mr. Obama during his campaign. (Of course, all bets are off if we get hit by another Katrina-level storm.)
7 Uncle Sam Spurns Insurance Oversight! Congress won't create an optional federal charter for carriers and brokers, since insurance is the least of Washington's concerns as lawmakers reform financial services regulation.
8 Insurers Get Urge To Merge! Fueled by AIG's divestitures and the brutal economy, look for a spurt in mergers and acquisitions as credit finally begins to loosen up. XL and The Hartford are two prime takeover targets.
9 NAIC Drops Ratings Initiative! I expect the National Association of Insurance Commissioners to come to its senses and quietly abandon plans to enter the ratings business in the face of insurmountable financial and logistical obstacles.
10 Spitzer's Back In Business! In my most controversial vision, I see New York's former governor and insurance nemesis, Eliot Spitzer, forgiven for his sordid liaisons and appointed to a key federal regulatory post. Would you still want a federal charter if Mr. Spitzer becomes Insurance Czar?
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