Willis Sees Hopeful Outlook For Late 2010

NU Online News Service, Oct. 14, 3:23 p.m. EDT

While the general insurance sector has escaped the global financial crisis relatively intact, remaining obstacles will need to be carefully managed in the coming year, according to a new report by Willis Group Holdings.

That analysis is contained in the 2010 edition of the "Marketplace Realities and Risk Management Solutions" report, that Willis said provides commentary and study of the insurance marketplace in every major line and select industry sectors.

The subtitle of the two-part report is Careful Steps. Willis Chairman and Chief Executive Officer Joe Plumeri said in a statement, "We urge our clients to move deliberately, thoughtfully, to take an extra moment and consider the broadest perspective in their view of risk."

In his introduction, he told risk managers that as "new business models emerge, new risk assessment will be needed. We must be ready to answer that need. This is a moment for partnership at many levels."

He also asked risk managers to "tell us what keeps you up at night. You need to work with your [chief financial officer] and your operations leadership to find out where the hidden risks may lie: in investments, supply chains, political risks, cyber risks, changing laws and regulations, etc."

In the introduction, Mr. Plumeri said to keep in mind "the golden opportunity that the turmoil of the past year-plus represents."

"I believe the world is ready to see us with new eyes, because insurance has never been more important. Every nation needs insurance. Every business needs insurance. Every person needs insurance. That has never been clearer. Let's make the most of this moment," he said.

The report, a guide for insurance buyers to plan for the coming year, includes articles on workers' compensation, employee benefits and all executive risks lines. It includes information on U.S. reinsurance, captive insurers, the Bermuda and London markets, international programs, and several key industry segments and specialty lines, Willis said.

Industry segments include aviation, construction, financial institutions, health care, life sciences, real estate and hotels, and utilities. Insurance lines covered include environmental, marine, personal insurance, political risks, kidnap & ransom, surety and trade credits.

Key factors Willis points to in the report include:

o Some insurance lines are hardening. While the market remains soft in most lines, political instability, global bankruptcies and losses in aviation have brought on rate increases for trade credit and aviation coverage.

o Filling a gap in supply chain protection. Marine and other insurance that protects supply chain exposures usually share one major shortcoming: it usually requires a physical loss to respond. Trade Disruption Coverage fills that gap.

o Estimates for catastrophic losses may be coming down. New models used in property insurance are lowering the estimates of loss from earthquakes and hurricanes.

o The world is catching up with the litigious U.S. The concept of moral damages--which underpins much of the litigation in the U.S.--is becoming a part of the thinking in Latin America.

o Financial institutions are avoiding the broad brush. Banks are not having an easy time of it, but those that have successfully managed their risk--and can document it--are seeing flat renewals and even occasional reductions in premiums.