06 Jul 2009
Insurance industry at a crossroads - half year market review
As 2009 reaches its half way point, the insurance industry is also at something of a crossroads – with the market and the economy pulling in different directions. Never has there been a more important time for risk managers and advisers to work together to manage their way through this complex environment. Mario Monetti and Mark Leysen – joint Chairmen of EOS RISQ – review market developments.
Q – The last twelve months has seen the global economy head into a serious recession. How has this affected clients who deal with the EOS RISQ partner companies?
Mario Monetti: The real issue that the insurance industry needs to understand is that risk managers are facing tremendous pressure to save money. Businesses are facing falling sales and shrinking revenues, and they need all the help they can get to improve their bottom line. They also need to buy insurance as they certainly don’t want to increase their risk profile at the moment.
Mark Leysen: Against this background, insurers are broadly trying to raise the level of premiums. They have lost money on their investment portfolios, plus reinsurance rates have risen, so their focus is on price rises. There is real tension between buyers and sellers – and the role of the broker is to help both parties come up with smarter solutions to bridge this gap.
Q – There have been high profile problems in the insurance industry as well – AIG in particular – has that affected how people look at the market?
Mario Monetti: The troubles at AIG made many insurance buyers really think about two issues, the first is how much of their insurance portfolio should be with one insurer, and the second is whether there was clarity about regulation and group structure, so that the real security behind their policies is clear.
Mark Leysen: Previously buyers relied mainly on information they received from the companies themselves. However, that has changed and all our brokers around the world spent a great deal of time talking to buyers about what the AIG situation meant, how it affected them and what they could do about it. Our staff worked hard to get timely and accurate information out – this is exactly the sort of calm thinking buyers look for in difficult times.
Q – Does all of this mean that buyers are looking both to review their insurers and or their brokers?
Mark Leysen: Any economic crisis impacts on business relationships and there is no doubt that many buyers are looking at this as an opportunity to review their insurance programmes. With their carriers there is a balance between price and the coverage offered, plus the security of the insurer is more important than ever.
Mario Monetti: With brokers it is a different decision. By and large when times are hard, buyers want and need more help and a greater level of service. Many of the global brokers have been affected by the recession and are cutting hours and letting staff go – so service levels are unlikely to improve.
Equally – nobody wants to be a small fish in a large pond – so a match between the size of the company buying the insurances and their broker is a good thing. Buyers want to talk to senior staff, brokers with the experience of having been through good times and bad – who can develop creative solutions and really stand in their clients’ corner when negotiating with insurers.
Mark Leysen: We think that the EOS RISQ model – leading, independent local brokers working in partnership with each other – means we are closer to our clients. Our local knowledge and commitment to service, combined with the strength and depth of our international organisation – will become an increasingly powerful proposition for buyers going forward.
