Lloyd's director says industry heading for stagnant demand and over-supply
Insurers are in danger of threatening the global economy by flooding a stagnant market with too many products, Lloyd's director of worldwide markets Julian James has warned.
Speaking at the Property Casualty Insurers (PCI) conference in Seattle, James said the next 12 months were critical in deciding the success of future insurance markets.
He warned that the progress of the past four years could be reversed if the trend towards weak premium growth, falling rates in most non-catastrophe areas and rising industry surpluses continued to pick up momentum. That, he said, would put insurers into the "financial intensive care ward".
"We are now standing on a potentially firmer foundation. But we put our future in grave danger if we stop here," James told delegates. "The environment in which we operate - both internal and external - is undergoing a time of brisk and dramatic change. As an industry, we will fail if we do not keep changing and adapting."
He also warned of growing pressures from regulatory intervention, a slowing US economy and the rising costs of claims. "It all adds up to a picture of stagnant demand and over-supply," he said.
Since the World Trade Center attack in 2001, James suggested that the insurance industry had come to terms with the post 9/11 world.
"It appears that the industry has engi-neered a turnaround in its financial performance that is nothing short of miraculous - with a return on surplus of around 10.5% in both of the last two years," James said.
"Last year even saw an industry profit despite the worst ever hurricane season on record."
He concluded: "This is a critical time for our industry, and the impact of the decisions we make right now will last a long time."