The 2011 insurance market seems fraught with both potential landmines and great opportunities. Al Tobin, managing principal at Aon Risk Solutions, says that although insurance companies did well in 2010, there are some factors that are making them cautious entering 2011.
“The more general your risk is, the more competition a company like us can bring to the table,” Tobin says. “More than ever, quality data is key to your renewal, whether it’s a property or excess casualty account.”
Smart Business spoke with Tobin and Mary Pulley, managing director of health care, Aon Risk Solutions, about what to expect in 2011.
What does next year hold for the property, casualty and liability markets?
In 2011, noncatastrophic general property risks, general liability and excess casualty will be competitive. Most insurance companies don’t see a change in the marketplace coming from anywhere other than the catastrophic property side of the business. That means earthquake, terrorism event, or significant wind storm event.
The results from insurance companies are fairly decent for 2010 for two reasons. First, there were no catastrophic property risks in the U.S., outside of the oil disaster — no big hurricanes or earthquakes. The second is that there were a lot of reserve releases — the surplus an insurance company keeps to protect it from incurred but not reported (IBNR) losses.
Insurance companies are pretty conservative; they make sure they have funds set aside for unexpected losses, predominantly casualty-related losses. Last year, insurance companies came to the conclusion that things weren’t that bad on the casualty side, so they had too much money put aside. Their actuaries allowed them to release some of those reserves, which helped boost profits.
Many carriers have been releasing reserves over the last few quarters, which helped boost their profits for 2010. But they can only do that so many times, which is one reason they are saying that they cannot continue to see prices decrease in 2011.
When anyone makes money in any industry, it puts additional pressure on price. You can make the argument that price should continue to decrease in 2011 for most customers, but expect some serious carrier pushback because they believe their pricing has hit an all-time low.
