insurance industry profits 2009
Where are we now – and future?
The professional indemnity (PI) market is currently in its soft phase, with insurers even emphasizing the volume at the expense of profit.
And the future? It is true that at some point the market will be more difficult to get into position. There is uncertainty about the market and how it can harden. Invariably the most profound and prolonged soft market adjustment will be more pronounced when it comes.
Events in the insurance, as in life, are powerful and unpredictable. What future events could conspire individually or collectively, to an early return to conditions more difficult market? The following is a list, by no means exhaustive, of possible culprits: —
1) The Credit Crunch – will have three adverse effects on the insurance market. First, it is likely that an increase in the cost of capital as its availability becomes scarce. Second, a reduction in base assets of the major insurance companies as sub prime losses, deteriorate the balance sheet – further reducing the capital available to cover the risks. Third, an increase in liability claims credit crisis as those who have suffered losses (owners, shareholders, etc.) try to recover from the professional advisors, company directors, etc.
2) Investment income – a combination of increased stock market volatility and reduced interest rates could see the insurer's ability to generate investment income restricted.
3) Environmental factors – after two years relatively benign (protected) natural disasters, the 2008 could see a return to more normal levels of representation – in particular in relation to the season hurricane?
4) Economic factors – a decline in the economy hits the insurance industry in two ways – always an increase in the cost of claims allied to a small group of economic activity from which to collect premiums.
And finally – Unforeseen events hand, our current forecast is that while the market is unlikely to harden in 2008, prices could start to climb towards the beginning of 2009.
As always, forewarned is or should, be better …
Griffiths and Armor Professional Risk Manager acts as the professional liability division of Griffiths and Armor.
Griffiths Armor & Professional Risks Ltd is an appointed representative of Griffiths and Armor, which is authorized and regulated by the Financial Services Authority.
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About the Author:
Paul Berg is the owner of Griffiths & Armour, UK’s leading independent indemnity insurance brokers, risk managers and financial advisers. We specialise in professional indemnity insurance and professional liability insurance for the construction and legal professions.
Article Source: ArticlesBase.com – Professional Indemnity (pi) Insurance Market
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