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Two recent conferences collectively brought together about 700 insurance industry executives from around the world. The International Insurance Society (HS) Seminar in San Francisco on June 17-20 drew senior level insurance executives from some 80 countries as well as academics. The World Insurance Congress (WIC), cosponsored by Business Insurance and Lloyd's of London Press in London on July 1-3, focused on the commercial market.

A speaker at both meetings was Lloyd's new chairman, David Coleridge. Awash in losses emanating primarily from U.S. business, which represents one-third of its premium volume, Mr. Coleridge blamed inadequate rates on insurers' worldwide push to gain market share. Looking to increase business outside the United States, he sees Lloyd's as being able to offer coverages unavailable in Europe, thereby complementing, rather than disrupting, local markets. He also envisions the development of consortium underwriting in which groups of syndicates and companies form specialty facilities. Mr. Coleridge anticipates an upturn in rates by year end (According to a poll of WIC delegates, 69 percent said the market would harden "a little" and 24 percent "a lot.")

Speaking at the RS, Bernhard Fink, executive director of Gerlung-Konzem m Cologne, observed that while "globalization" may be a current buzzword, "one win find a remarkably small number of true global players." But, he pointed out, to service corporate buyers effectively often requires drawing on capacity from many markets, and corporate clients are seeking coordinated programs. "No international concept will work without proper backup on the local level," he st", suggesting that more insurers will look to form joint ventures to strengthen their capabilities.

At the WIC, Bjorn Wolrath, CEO of Skandia, offered his view on Europe. Noting that Sweden has applied for membership in the European Community, he urged insurers to get involved in the political process and become more attuned to their social responsibilities. He predicted an overhaul of the social insurance programs so prevalent in many European countries, as governments can no longer afford them, especially in light of aging populations. Yet people, he said, are becoming more security-conscious, which bodes well for the insurance industry.

Japanese insurers see grow the merging for them in south and northeast Asian countries, according to Takashi Kagawa, senior managing director of Tokio Marine & Fire Co. Some 15 of Japan's 20 insurers operate overseas to insure Japanese corporations. While 38 foreign insurers are established in Japan, only three operate as domestic companies. They have captured little market share, undoubtedly due to the vast distribution networks in place.

From a U.S. perspective, Edward Hanway, president of CIGNA Worldwide, cited what he termed critical success factors: He joined Gerling's Mr. Fink m calling for insurers to establish a strong local presence wherever they operate; be willing to go where the customer goes; and find a way to become more cost efficient. We must, he said, "seize the opportunity and take the risk."

Which leads to the alternative markets, bred in the United States in response to various crisis, especially the liability insurance market collapse in the mid-1980s. Still most prevalent among US. corporations, according to Divid Olsen, c of Johnson & Higgins, there is rapid acceleration of captive formation in Europe and awakening interest in Japan. The failure of insurers to stabilize loss costs, he said, led risk managers to restructure their programs with heavy reliance on self insurance and captive mechanisms.

Looking at the emergence and role of the "private" or "specialist" insurers was Brian O'Hara, president of XL. He sees XL, along with ACE, CODA and others-all based offshore in what he terms an archipelago-as low-cost providers that have circumvented U.S. regulatory costs and do not carry other burdens faced by commercial insurers. We must, said Mr. O'Hara, "stick to our niche and underwrite for a profit." This means having the courage to withdraw when price demands are unreasonable rather than waiting until results are unmanageable.
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Title Annotation:International Insurance Society Seminar
Author:Epstein, Rita
Publication:Risk Management
Article Type:editorial
Date:Aug 1, 1991
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