In insurance, perfect storms come in all shapes and sizes. Consider this one, as we all must. Years and years of ample capacity and manageable losses resulted in commercial insurance pricing floating further and further downward. Everywhere you looked, but especially in property, underwriters were not able to hold the line on price. And then it came. The third quarter of 2017. Unprecedented Caribbean storm activity aligned with
a whopper of an earthquake in Mexico and wildfires that scorched
hundreds of acres in California’s pricey wine country.
By some estimates as much as $100 billion in insurance industry
surplus was wiped from the books in a matter of weeks, at a time when
carriers were charging the lowest premium prices relative to the risk
in many years. Big carriers like Chubb and AIG saw 3Q losses of more
than $1 billion.
As he takes the reins at AIG, no less a figure than Brian Duperreault
has christened 2018 the year of the underwriter. Across the industry,
entire lines of business are being rewritten in this transitioning market.
“The severity of the recent catastrophic events forced AIG and
all market participants to reassess appropriate pricing for the risks
assumed,” Duperreault said.
Data and analytics receive lots of attention and resource investment,
but as Duperreault and other 2018 Insurance Executives to Watch stated
recently, data and analytics are just tools to be wielded in the hands of
experienced underwriters, for which there is no replacement.
“No one has commented more on the importance of data analytics
and technology in our industry than me,” Duperreault said during a
third quarter earnings conference call with analysts.
“However, it is the underwriter, properly armed with this
information, that is the central control point of our business. So, it is
important that we get the balance back. Our use of technology and data
will complement seasoned underwriters with the skill sets to evaluate the
business on a risk by risk basis,” Duperreault said.
Duperreault also signalled that he planned to re-examine his
company’s approach to the use of reinsurance.
“You know it is not my style to take large limits and retentions of
risk,” he said. “We will also partner closely with reinsurance as they
provide another valuable set of eyes into our book.”
— Dan Reynolds
2018: Year of the