For the property/casualty industry, 2009 will be “transitional if not transformational” according to a new report from the global insurance center of New York-based Ernst & Young.

Indeed, the consultancy suggests several areas that carriers should focus on to meet challenges in a fast-shifting competitive landscape. Foremost among these is a re-directed focus on premium pricing. The report notes that after four years of a soft market, carriers need to ready themselves for a hardening. “Early indications of pricing negotiations give strong support to a least a firming of the market in most lines,” the report states. “Insurer and reinsurer concerns over loss volatility and potential for mega-losses in highly developed catastrophe-prone locations should contribute to price stabilization.”

Another area in which carriers should steel themselves for change is the area of regulatory oversight. “Momentum for change in the insurance regulatory structure is building, and the near-term uncertainty about the outcome presents challenges for the industry,” the report states. One certainty, according to the company, is that carriers will need robust risk management abilities to deal any forthcoming regulatory initiative. “Regulation is likely to be more intrusive, encompassing more continuous monitoring of activities and financial performance, perhaps with higher standards of solvency over the longer term,” the report says.

In a similar vein, insurers should prepare for changes in accounting requirements in the coming year. The coming convergence of U.S. generally accepted accounting principles (GAAP) with International Financial Reporting Standards (IFRS) will present many challenges to companies.

While changes to regulations and accounting standards happen according to well-publicized schedules, changes to the landscape wrought by mergers and acquisitions can happen at any time. Despite widespread trouble raising capital, deals can still happen. “The financial crisis has created a unique confluence of events resulting in an unprecedented landscape for insurance mergers and acquisitions,” the report states. “A few companies will emerge from the current situation with strong balance sheets and will use a portion of capital to fund an acquisition, but they are likely to wait until the depth of the current economic downturn, and its impact on operating performance, is better understood.”

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