Hard Market Storm Clouds on the Horizon, Be Ready For It.

Yep, I said it.  I see the clouds starting to billow up in the distance.  In the news today, three insurers released results, and they were about as handsome as The Elephant Man the morning after his bachelor party.  The Hartford posted a $2.6 billion quarterly loss, resulting in a 50% drop in shares, and an all time low.  If you don’t recall, the last hard insurance market hit following 9/11 when insurers took a big hit on their investments on Wall St.  This caused Insurers to focus on underwriting in order to make money on their core business, since Wall St. offered very little.  Prior to that, Insurance companies could lose money on their core business but still make money in a flourishing stock market.  Insurers could have a 120% loss ratio, meaning that losses amounted to 20% more than overall written premiums, but still register profits from investments.  But since 9/11, most insurers have improved loss ratios to well under 100%, many dropping to as low as 80%.

OK, the storm clouds.  I have been reading about underwriting results over the last month or two, and losses are mounting.  Just this week, Risk Management Solutions updated the estimated losses associated with Hurrican Ike  to be $13-21 billion, and reinsurers are starting to talk premium increases.  Add in this morning’s news along with all of the other Wall St. and economic woes, and the picture is looking eerily familiar.  It it quote possible that the soft market is coming to a close and the hard market is approaching, bringing with it increasing premiums and constricting terms and conditions as is typical during such a market.

So, enjoy the sun for a little while longer, but start closing the windows and crank down the umbrellas.  It’s time to roll up your sleeves and put your risk management hats on again.  It’s time to get strategic, have plans in place, and think outside the box.  But don’t wait, because you’ll get very wet if you aren’t ready for it.