Insurance Outlook Mixed for 2012

By Liying Gu
The ACI-NA Risk Management Committee kicked off the New Year with its 13th Annual Risk Management Conference held in the warm and sunny New Orleans with close to 140 attendees, up more than 30 percent over last year’s attendance.

The first session Thursday highlights the current airport insurance market and its emerging trends of domestic liability, property, and professional coverage/employment practices liability.

John Geisen, Senior Vice President, AON Risk Services Central Inc., provided a review of the aerospace insurance market with a focus on airport market capacity and the outlook for 2012. The airport and air traffic control sectors ended 2011 with a 7 percent premium reduction much as they did in the past three years. This continued softening is driven by surplus capacity. Geisen is predicting that 2011 could be the bottom and prices in the sector might start to rise if passenger numbers recover but all evidence suggests a flat 2012.

On the property market, Richard Terlecki, Area Senior Vice President, Arthur J. Gallagher Risk Management Services, delivered some bad news. There were 12 losses that exceeded $1 billion in 2011 with a total of $70 billion catastrophe losses in just the first half which was the second worst in history. On top of the losses, interest rates are at historic low which translates to low investment returns. All this means that insurers are being forced to reassess exposures which would lead to reduced capacity on the property side.

In contrast to the liability market, there is relatively limited underwriting capacity for public officials’ liability, according to Simon P. R. Hodge, Managing Director of Wells Fargo. Finite number of insurance carriers restricts competition with pricing and terms driven by broader Directors & Officers and Errors & Omissions insurance markets. There remain significant opportunities, however, to enhance coverage quality.