Don't Be Afraid of Shadows

ebruary brings us the venerable and rather silly holiday known as Groundhog Day, when the eponymous furry rodent predicts a lingering winter if he sees his shadow (and what a winter it's been, what with immobilizing snowstorms on the East Coast in December and last month's freak freezing rain in the sunny South).

Just as we turn to the groundhog's prediction for a return to good times, we find ourselves in the dead of winter at the start of a new year, hopefully looking for signs of spring in the economy and the insurance industry.

In this case, the groundhog is pretty confused. Many indicators in the general economy show signs of improvement: a little relief in unemployment figures, the stock market ticking up on better news from the European markets and improvements in manufacturing, retail and consumer confidence.

But there are shadows in the property-casualty industry. Although some top insurance executives in a recent Wall Street Journal interview say 2011 will be the “beginning of the end” of the soft market, others believe we haven't hit bottom yet. A.M. Best has revised its 2011 outlook for the commercial insurance industry from stable to negative, citing soft pricing, hot competition and dwindling loss reserves. And although hiring is up in most other business sectors, employment within the ranks of property-casualty insurance companies is the lowest it's been in 20 years, according to an Insurance Information Institute analysis of U.S. Bureau of Labor Statistics figures.

So where's the springtime? Right around the corner, according to III President Robert Hartwig in a recent webinar on the state of the catastrophe insurance market. According to Hartwig, the industry began seeing improvements in third-quarter 2010, and all indications point to continuing positive premium growth in 2011 and beyond, thanks to sensible pricing, conservative investments and adequate loss reserves. Even last year's boogieman of healthcare reform is casting less of a shadow: Fitch Ratings just brightened its outlook for the U.S. health insurance and managed care market from negative to stable, based on the perceived manageability of insurers' business models and operating fundamentals. In other words, insurance is starting to get a handle on something that at first seemed insurmountable.

In the same vein, this month's feature on the evolution of pollution/environmental coverage is an informative perspective on how the industry grappled with what seemed a formidable threat and ended up not only taming but befriending it. We also take a look at how businesses can incorporate enterprise risk management into their operations to prevent web-related exposures like the WikiLeak backlashes of last December. And just for fun, check out our article on film and entertainment risks and the insurance backstory behind some of your favorite movies.

Lighten up! Spring is inevitable.