Though the general liability line of insurance has produced industry-wide combined ratios below 100% for the past two years, the next couple of years will see general liability premium reductions lessen in severity, gradually leading to a modest increase by 2010, according to Mark Jablonowski, analyst at Conning Research & Consulting.

"However, losses and expenses are forecast to grow more quickly, with a resulting rise in combined ratios reaching 107% by 2010,” he says. “In the longer run, the future of the general liability insurance market will play itself out between the cumulative effects of small to moderate losses, and the rising prospect of mega-risks."

The research and consulting firm’s study, "General Liability: Staying Relevant (and Profitable) in the New World of Risk," identifies the issues facing the market, and a number of considerations and actions that insurers should address.

"History has shown us a cyclical increase in general liability losses in periods following recessions," says Stephan Christiansen, director of insurance research at Conning." At the same time, longer-term secular trends point to an increase in both smaller claims and larger mega-risks. Meeting the challenges to profitability requires a variety of considerations on the part of insurers. Foremost is the ability to monitor trends in costs—particularly losses—and demand.

“Longer term, the best prospects for general liability insurers may come from expanding the model of specialization in risk that has already proven to be a successful differentiator among companies," he says.

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