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IIS survey points to brighter business outlook

New market opportunities are creating a more positive business outlook than at any time in the past three years, the most recent International Insurance Society (IIS) survey of insurance executives has revealed.

For the survey, over 200 global insurance executives attending the IIS annual seminar were asked their views on market conditions.

In their responses they revealed the most pressing issue in 2004 was “taking advantage of new market opportunities”, followed by “managing risk” and “keeping and building organisational talent”.

The latter has not been a central issue in the survey since 2000 when it was ranked as the second highest issue among survey participants.

Recovery from adverse conditions” ranked lowest among executives' top six concerns, while “maintaining competitive pricing” and “productivity, efficiency and expense controls ” were placed third and fourth. “Meeting customer demand” slipped from its first ranking position in 2001, and second ranking positions in 2002 and 2003, to be below the top six issues in 2004. Where “maintaining competitive pricing” was a leading concern in 2002, in 2004 it slipped to fourth place.

Andrew Giffin, principal in the Tillinghast business of Towers Perrin, who analysed the results, said current results revealed a new optimism in the insurance market.

The targets most identified by survey respondents as ripe for regional growth included Asia/Pacific (32 percent), Europe (20 percent), US/Canada (18 percent) and Latin America (6 percent). Noted Giffin: “This undoubtedly reflects in part recent growth in business opportunity in China and India, as well as global economic recovery.

He added: “While the positive turn in opinions is evident, we also see some caution in the second most pressing concern: managing risk. Executives are well aware, in this Post-9/11 and Post-Enron environment, that failure to manage the downside potential risks can be catastrophic for business.

The survey results, ranked by percentage of responses, were as follows:

What is the most pressing issue for you and your company?
1. Taking advantage of new market opportunities 30%

2. Managing Risk 20%

3. Keeping and building organizational talent 20%

4. Maintaining competitive pricing 13%

5. Productivity, efficiency and expense controls 11%

6. Recovery from adverse conditions 6%

What is the most pressing financial issue?
1. Maintaining competitive pricing with adequate profitability 41%

2. Managing Risk 21%

3. Measuring and reporting financial results 14%

4. Capital management and allocation 13%

5. Meeting regulatory requirements 10%

What is the most pressing growth issue?
1. Taking advantage of new market opportunities 55%

2. Recovery from adverse conditions 20%

3. Industry consolidation 13%

4. Merging or acquiring for needed growth 12%

What is the most pressing operational Issue?
1. Productivity, efficiency and expense controls 30%

2. Keeping and building organizational talent 30%

3. Meeting customer demands 22%

4. Distribution efficiency and effectiveness 15%

5. Leveraging technology 4%

As reported in Insider Week No. 130, Lloyd's chairman Lord Levene referred to the survey in a speech at the International Insurance seminar at London’s Hilton Hotel. In what he described as “a warning and a plea” to underwriters he said maintaining pricing was essential if the mistakes of the past were to be avoided.

Our underwriters have made it clear that they will not accept risk on uneconomic terms. But if insurance is to be profitable in the long run, we need to keep our nerve not just at Lloyd’s but right across the industry,” he noted.

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