| Publisher's
Roundup
The December issue
features our annual report on the commercial insurance
market. To complement that report we asked several executives
in the commercial insurance market to comment on what
they foresee for the industry in 2005.
Related
story:
- Virginia joins probe of insurance
practices
- Hilb, Rogal & Hobbs builds
its brand in an industry that’s under fire
John H. Parrott Jr., CIC
Senior vice president and division manager
Rutherfoord
Roanoke
“The commercial insurance market has
experienced three consecutive quarters of declining
prices in 2004. Based upon the current market in the
beginning of the fourth quarter and the aggressive new
business goals of many insurance companies for 2005,
I expect that the market in 2005 will continue to reflect
modest price decreases and improved property capacity.
A few notable exceptions to this trend will be seen
by companies with exposure to residential construction,
silica, mold and construction defects.”
R.C.
Moore III
Principal, producer
Tabb Brockenbrough & Ragland
Richmond
“The insurance environment for the 2005
year will see improvement in both availability of coverage
and moderation of pricing. The carriers are producing
quarter-to-quarter improvement in operating results,
and the indicators of future loss trends are also showing
marked improvement. Virginia commercial insurance buyers
did not see the harsh escalation of prices found in
other states in the earlier phase of the hard market
cycle and should now benefit from an improving market.
While there are certain market segments such as residential
builders where coverage and pricing remain difficult,
the vast majority will see a much more responsive market.
“The recent New York attorney general’s
investigation into brokerage practices should not be
viewed as a reflection on the industry as a whole. Insurance
remains a vital part of commerce in Virginia with strong
competitive forces in play to assure efficient delivery
of competitive products. This coupled with sound regulatory
oversight provides confidence in the integrity of the
marketplace. Virginia remains a place carriers want
to do business; where honesty has been a consistent
characteristic.”
Logan
Forsyth
Executive vice president and secretary
Chas. Lunsford Sons & Associates
Roanoke
“This
summer, the U.S. property and casualty industry was
enjoying a rare profitable year. Rates had stabilized
and were even declining in some cases. Then came the
hurricanes, with an estimated $25 billion to $30 billion
in storm losses. This will likely slow the downward
trend of commercial insurance rates. Whether this is
momentary or extended depends on how hard the reinsurance
companies were hit by the storms. However, there should
be no major disruptions as was caused by Hurricane Andrew
in 1992, and we don’t expect dramatic changes
in rates for 2005.”
Yullie
Holt III
President
Campbell Insurance
Lynchburg
“In
the business insurance marketplace we are predicting
very modest rate increases averaging between 1 and 5
percent on desirable, profitable accounts. As a comparison,
last year those same accounts experienced rate increases
of between 7 and 12 percent. We also see underwriting
guidelines being relaxed to some degree.
“Unprofitable and high-hazard accounts continue
to be difficult to place in standard markets. However,
these same accounts continue to find homes in the excess
line marketplace at higher costs.
“And, the market is definitely getting softer
in spite of the hurricane damage incurred several months
ago.”
Walker P. Sydnor Jr., CPCU
President
Scott Insurance
Roanoke
“The commercial property and casualty
market should continue the trend of gradually softening
rates for the more preferred classes in 2005, while
some tougher classes will remain in a hard market.
We believe that businesses should reduce the demand
for insurance by focusing on risk management and self-funding
all expected losses.
“The fallout in 2005 from the recent Marsh/New
York attorney general lawsuit will likely have little
impact on insurance companies, although there may be
some turbulence in the agent/broker communities. Higher
disclosure standards of broker income is a likely development
in 2005.”
Thomas
C. Routson
Regional vice president
Mid-Atlantic Region
Zurich Financial Services Group
Virginia
continues to be an attractive market for small, mid-size
and large/global commercial business. I agree with industry
experts who foresee increased competition among insurers
for the best business. The industry needs to maintain
underwriting principals while remaining competitive
as the market softens and prices begin to drop. Rigorous
improvements in our underwriting methods and enhanced
technology give me confidence Zurich will remain a major
player even as the market turns. One of the greatest
challenges we face in the insurance industry is a continuing
need to strengthen reserves (funding to pay for past
losses - many dating back a decade or more). We, as
an industry, also need to seek meaningful tort reform.
To be successful in 2005 insurance companies need to
offer a range of products and services, as well as innovative
underwriting, risk engineering and claims solutions.
Companies will also need to be on the cutting edge of
technology, with information systems that save customers
time and money.
Return to Virginia Business - December 2004
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