Political, economic, global and industry uncertainty is top of mind for insurance professionals this week as leaders in the property/casualty space gather for the PCI Annual Meeting in Dallas, Texas.
The theme of this year’s conference is “An Era of Uncertainty” – a topic chosen by the Property Casualty Insurers Association of America’s Executive Advisory Committee last winter to reflect market softening, rising loss costs, low return investment, technological disruption and anxiety over regulatory overreach.
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“I think [PCI] was very prescient because all of these uncertainties have only increased over the course of the year,” PCI President David Sampson told the event’s more than 1,100 attendees Tuesday. “And it appears the outcome of the 2016 election is not going to do anything to remove that uncertainty. In fact, it might increase it.”
Insurers and reinsurers meeting at PCI are also concerned about finding growth opportunities in a mature market. A morning reinsurance panel featuring representatives from Willis Re, Munich Reinsurance America,
Guy Carpenter and Atrium Syndicate tackled the topic Monday.
Noting the abundance of capital flowing into the industry, particularly alternative capital, Guy Carpenter Vice Chairman David Priebe noted that a market-changing event that would reverse pricing trends is “tough” to visualize.
“The system is built to sustain a $100 billion event, or even two events, [and even then] if that event is expected, investors would rally quickly,” Priebe said. “It’s that really unexpected event, that black swan that would change investor confidence.”
Though agreeing such an event would be difficult to conceptualize, Munich Reinsurance America President Steven Levy warned that it would be a “huge mistake” to view the softening market and easy capital flow as unchangeable.
“These trends can reverse very quickly and very easily,” said Levy, stressing that unfavorable loss development is already occurring in certain lines thanks to medical and tort inflation.
The panel members also offered comment on “what keeps [them] up at night” regarding the current and future state of the industry, mentioning the changing nature of terrorism and the difficulty of underwriting cyber risk.
Regulatory burdens are also a point of apprehension. PCI recently put out a study suggesting regulatory compliance costs had increased 19% for insurers over the last two years, disproportionately impacting smaller insurance companies that do not have the resources to quickly and efficiently answer requirements like data calls.
“It is clear that the industry has reached an inflection point and the cumulative effect and timing of new regulations and state data calls are increasingly costly, impactful and intrusive – affecting the industry’s ability to serve policyholders,” Sampson said during his morning address.
This new, concerning state of affairs is likely to be something of a “new normal” for the industry.
“In the midst of so many unknowns, there are some knowns. First, this heightened level of uncertainty is likely to remain with us for the foreseeable future,” said Sampson. “Second, the pace of change and disruption in all of its forms is likely to increase, bringing both challenges and opportunities.”
The PCI Annual Meeting runs through Tuesday in Dallas.
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