RMs Advised: Get Busy On Jan. 1 Renewals

“Get into the market very early” for Jan. 1 renewals.

That the message a broker executive delivered to risk managersgathered for the Risk and Insurance Management Society New YorkChapter October breakfast seminar.

“The people who are there first will get the capacity first,”said Michael OHalleran, president and chief operations officer ofChicago-based Aon Corporation, adding that he believes that“underwriters will be fair.”

The reinsurance market has had a dramatic impact from Sept. 11that he likened to “a deer in the headlights,” because very littleis getting done, people are waiting to see where their capacitywill come from and they are “sitting on renewal terms,” he said. “Ipredict that most reinsurance treaties will not be completed wellinto the first of the year.”

On top of this, he said there is an issue with solvency. “Eventhough the NAIC has said the industry has enough capital, our issueis that maybe thats the case, but the reality is that the liquidityissue could become quite dramatic.”

Mr. OHalleran said he is “optimistic about the future” as wellas the industrys ability to find solutions, because “thats thebusiness were in.”

Other industry executives agreed that the insurance industry isindeed resilient and will come out ahead after the recent terroristattacks on Sept. 11. They added, however, that it is important thatthe government assists with a terrorism reinsurance facility.

“The industrys losses are outside of comprehension,” said EdwardNoonan, Chairman and chief executive officer of American Re inPrinceton, N.J. “We never modeled an event involving so many typesof coverage.”

“This is the perfect storm at worka lot of factors are comingtogether. This is a climate we havent seen since 1984,” hesaid.

He said its “critical for the government to step in onterrorism,” referring to recent efforts by the industry and thegovernment to create a federally-backed reinsurance facility forterrorism risks. “[Terrorism] is a risk we cant take” at thepresent time, he said, because “we dont know how to price it.”Although over time, he added, pricing the risk will not be aproblem for insurers.

“Were going to see a marketplace that will be very, verydifficult in terms of how we get capacity, how we build capacity,how we put terms and conditions together, and how we look foralternatives to deal with this,” he said.

Thomas Motamed, executive vice president and chief operationsofficer, Chubb Group of Insurance Companies, Warren, N.J., observedthat because of Sept. 11, “people now realize that insurance isessential to the economy.” The events of that day “will affectevery insurer and customer in the world.”

He concluded that insurers and agents must focus on providingthe best possible protection for customers. “Our business is aboutturning questions about price into conversations about value andcoverage,” he said.

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, November 5, 2001.Copyright 2001 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.

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