According to Lloyd’s newly released annual underwriter survey, “managing the insurance cycle as the most important challenge facing the global industry for the second year running.” The survey also found that “nearly 90 per cent of underwriters believe that windstorm is likely to be the biggest cause of loss to the industry in 2006.”
Lloyd’s said that “more than half of those questioned believe that avoiding the ‘boom and bust’ nature of past cycles will be the most powerful way to strengthen the industry’s reputation. But over two thirds said that the industry had not made enough progress on the issue over the past year, and more needed to be done to address it.”
The following is a summary of the survey’s findings:
1 – The US and China are seen to offer the most significant growth opportunities for the insurance market in 2006, increasing further in importance since last year.
2 – Lloyd’s appetite for difficult risks is its strongest source of competitive advantage, followed by the heritage of the Lloyd’s brand and the market’s superior underwriting expertise.
3 – The greatest impact of last year’s hurricane season will be decreased reinsurance availability, followed by higher catastrophe rates.
4 – Speed of response to catastrophes is something the Lloyd’s market was particularly noted for having done well in 2005. Payment of claims was the second most mentioned aspect.
5 – For the second consecutive year, managing the cycle is the most important challenge for the non-life insurance market to get to grips with in 2006.
6 – Contract certainty and increased transparency are seen as the next most important challenges. These are also ranked the same as last year.
7 – Avoiding ‘boom and bust’ cycles is seen as the most powerful way to strengthen the insurance industry’s overall reputation, followed by increased transparency/disclosure, and education about the role of insurance in the world.
8 – Whilst pricing is again expected to be the most significant concern for buyers, other considerations such as availability of coverage and financial security are expected to come into play in 2006.
9 – In the wake of two record hurricane seasons, windstorm losses are again predicted to cost the industry the most money in 2006, and the risk of further natural catastrophes is the greatest concern for the industry this year.
10 – While a quarter of underwriters say that the insurance industry has made significant progress on managing the cycle during 2005, an overwhelming 69 percent say that there has not been enough progress.
Julian James, Lloyd’s Worldwide Markets Director, commented: “With two severe hurricane seasons behind us, these findings underline the fact that the need for cycle management has never been more crucial for insurers and reinsurers. Ensuring strong financial performance remains a priority for Lloyd’s, and is a key part of our strategic plan.”
The complete report can be obtained on the Lloyd’s Website at: www.lloyds.com/research.
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