This year's insurance market prices should remain soft but relatively stable, just as they were in 2009, officials from Marsh predicted in a report released last week.
In its report–"Competition Nets Rewards. U.S. Insurance Market 2010: It's About Your Risk"–Marsh said the insurance market in 2009 reflected intense competition among insurers, increased capacity and fewer insured catastrophe losses, and is poised to repeat those trends again in 2010.
A few lines, such as directors and officers insurance for financial services, bucked the soft market trend, but generally the insurance market avoided the hard market predictions of earlier in the year.
Insurers understood customer willingness to market their accounts, Marsh said, and brokers were able to use that fear of losing accounts to get better prices for a client's risk or improved terms and conditions.
Commercial property insurance in the United States is expected to remain stable, provided there is not a major catastrophe, the report said.
The soft market and stable conditions are also expected to remain for other lines of business for the coming year, Marsh added.
The major challenge for insurers this year will be maintaining profitable business as the old earnings model has proven itself not to be that reliable, Joe McSweeny, president of Marsh's U.S. and Canada divisions, said during a Web seminar discussing the insurance market.
"This recession has made it clear that investment earnings cannot be viewed as a consistently reliable source of significant earnings that insurers traditionally [expect] them to be," said Mr. McSweeny.
"That means they will be motivated to work hard to achieve underwriting profitability and risk-appropriate rates," he added. "This will be the biggest challenge for insurers, in my opinion, in 2010, as broad-based hardening of rates is not expected in the near term."
Steve Weisbart, chief economist for the Insurance Information Institute, said during the webinar that the industry's results, while an improvement over 2008, were not necessarily due to good management but a light catastrophe loss year with improved earnings. "Those outcomes cannot be expected to continue," he said.
There will be pressure on insurers to achieve underwriting profitability, and a hard market will come–it's just a question of when, he added.
During this soft market period, policyholders should look to find ways to reduce their risk profile and put themselves in an advantageous position when the hard market finally does arrive, Mr. Weisbart advised.
Concerns that insurers would be forced to spend more to satisfy regulatory issues seem to be subsiding, he noted, but there continues to be pressure for the United States to speak with one voice when it comes to dealing with international regulatory challenges.
It would be advantageous for the United States to develop a single, internationally recognized accounting standard when it comes to insurance, thereby making it easier for investors to understand their business compared to other businesses, advised Mr. Weisbart.
On one hand, the easier comparisons could make more investors willing to invest in the industry or allow insurers to meet stricter capital requirements regulators might impose, he suggested.
However, some critics fear one standard could make insurer financial reporting more volatile and make capital "less willing to go to insurance, and that would be a terrible outcome," Mr. Weisbart said.
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