He also said that strong companiesboth primary and reinsurerswill be the beneficiaries of a “true flight to quality,” replacing what he said a broker once referred to as an “amble to okay,” without identifying the broker.

“There is a flight to more traditional, highly-rated, stable reinsurers, [and] I think they are pricing for that. That could lead to a harder–or at least an extension of a more stable market–as those price increases flow through,” he said.

On the primary side, aggressive actions by rating agencies have captured the attention of key distributors in recent years. “Brokers and agents, [who] may not have been terribly interested before, are now very interested in this [activity],” he said, noting that anticipatory reactions on the part of distributors are taking place as soon as a carrier is viewed as weak.

As agents move with more speed, capacity will dry up very quickly as lower-rated companies are forced to constrain. On the other end, he predicted, larger, stable companies will price for their status as they absorb the better business.

The consolidation of brokers also plays into all this, he said, suggesting that fewer, stronger distributors, controlling bigger shares of the market, will concentrate their shelf space with fewer, larger carriers.

“These brokers are very smart economic institutions [that] think about total profitability. Its not just about price and commission. Its about service capabilities,” he said, echoing other insurers who said it gives them a real opportunity to offer to service business more cheaply, allowing distributors to focus on sales and advice.

As for challenges facing The Hartford, theyre much the same as everyone elses, with cost-cutting plans and “ease of doing business” technology high on the list.

Driving down costs involves “setting the right targets,” which for Mr. Zwiener means looking to achieve or beat the “best-in-class” commercial lines expense ratio of about 30. “We reduced our expense ratio by about two points in the last two years, and I think we can get the other two points in the next two years” to get to the “best-in-class structure,” he said.

Hartford has already taken some very aggressive expense actions, including eliminating 1,500 positions in May. “Where weve eliminated expense aggressively has not been in the field. Its been around home office type activities that we just couldnt afford anymore,” Mr. Zwiener said. “Its the kind of expense management you see a lot [at] Travelers and youre going to see a lot more of [at] The Hartford.”

“Ultimately, if loss costs and pricing equal each other in a stable market, the only way you can expand your margins is through your expense ratio,” he said.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, January 2, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.