Though relatively unfazed by the financial crisis, a continuing soft market will present problems for property/casualty insurers, a new report finds.
New York-based Ernst & Young’s Global Insurance Center 2010 U.S. Property-Casualty (P/C) Insurance Industry Outlook contends insurers will be challenged by pricing pressures caused by a prolonged weakness in the underwriting cycle.
While the vast majority of P&C insurers did not suffer losses as a result of financial crisis, they will still feel its effects, as they are no longer able to rely on investment income to offset underwriting losses. Accordingly, the report says P&C insurers must place a new emphasis on expanding in more profitable underwriting markets while controlling risks in less profitable ones.
In addition to better underwriting discipline, carrier must also make operational efficiency a high priority says Peter Porrino, global director of insurance, Ernst & Young’s Global Insurance Center.
“Because underwriting conditions are soft and continue to worsen, P/C insurers must prioritize controlling expenses and making their businesses as efficient as possible,” Porrino says. “As the economy recovers, stronger insurers will no doubt find opportunity to grow organically and through acquisitions, while the weaker companies will likely be forced to exit less successful and non-core business.”
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