Andrew Underwood
Head of Specialty Division
Hiscox USA

Risks to businesses in the U.S. such as cyber security, social media and legislative change continue to evolve on top of the more familiar, but not forgotten, threats to people and property. We're addressing these emerging risks with dedicated industry forms and packaged products to meet buyer demand—the opportunities in 2012 belong to those insurers that innovate and adapt.

Low investment returns and tighter operating margins for buyers mean the insurance industry is being called upon to provide greater value than ever before. In this market, the most successful insurers in 2012 will offer better products at reasonable prices and back them up with excellent service and prompt claims payment.

Dave Obenauer
President
Crump Insurance Services

During 2011, we started seeing a real flight to quality in terms of the intermediaries that clients choose to work with. Most clients are looking to develop deeper relationships with fewer intermediaries in order to increase the quality of service, create more efficiencies in the workplace and find growth opportunities. We continue to leverage our scale as we work with carriers and our customers.

Secondly, retail brokers see the advantages of providing coverage to small businesses. It's good business, and the opportunities for organic growth are significant. But it can be labor-intensive. As an industry, we must develop processes using new technologies that enable efficient processing of small business.

We see growth opportunities in markets and industries such as health care, life sciences, energy and cyber liability.

One challenge for 2012 is the continuing management of client expectations in a transitioning market. Underwriters are increasingly looking to increase rates and restrict coverage at a time when buyers continue to face budget/cost pressures. As the intermediary, we need to continue to focus on bringing the best options to the client in a changing marketplace.

BB&T acquired Crump Group in early February in a deal valued at $570 million; Obenauer is expected to continue in his current role.

Steven Pozzi
Executive Vice President
Chubb & Son & COO for Chubb Commercial Insurance

Given the extreme weather patterns of the recent past, we will be watching Mother Nature even more carefully in 2012. Natural catastrophes, such as tsunamis, earthquakes and tornadoes, present myriad challenges to companies worldwide.

As a result, companies are faced with a plethora of exposures and concerns from business interruption to proper valuation of property and rebuilding property. Managing supply-chain disruptions that will result from natural as well as man-made catastrophes will also be essential for companies that want to financially prosper in the years ahead.

Companies will also need to stay abreast of evolving exposures from newer products and services they provide worldwide—some of which were barely contemplated as recently as 10 years ago—if they want to continue to flourish in the foreseeable future.

Robert Cox
Executive Vice President
Chubb & Son & COO for Chubb Specialty Insurance

In 2012, we will continue to monitor areas related to the weak global economy, heightened regulatory requirements and new legislation, and data-security breaches.

D&O activity related to the growing number of public-company merger-objection lawsuits and the high number of private-company bankruptcies will be another area to watch.

Companies may also experience an increase in exposure to risk due to the continued high unemployment rates, the recent Dodd-Frank and health-care legislation, increased Department of Labor oversight, and merger-and-acquisition activity. For companies with a global strategy, there may be greater exposure as regulators become more proactive in countries worldwide.

Rich Stann
Vice President
Commercial Product and Pricing Farmers Insurance

With the low-interest-rate environment in which we find ourselves expected to persist, the commercial industry cannot continue operating with high combined ratios—estimated at 110 over the last year.

The recent spate of catastrophes has companies rethinking the pricing for these events. The combination of low interest rates and unpredictable but frequent catastrophes is leading to a firming of rates, with some companies reporting rate changes in the upper single-digits for certain lines.

Farmers has opportunities in expanding our exclusive agent distribution into the Eastern states in a controlled and thoughtful manner as we strengthen our brands.

To ensure we are adjusting our rates in the correct places, as well as identifying other areas for improvement, we continue to invest in analytics.

Vince Tizzio
President
Commercial Markets & Customer Industry Segments Zurich North America

The challenges commercial insurers faced in 2011 in the form of an unprecedented catastrophe year, further deterioration of Workers' Compensation combined ratio and sluggish investment returns has forced insurers to do more than just sell insurance.

The commercial market will likely see double-digit increases in some areas. I think it's going to make carriers—particularly those with sophisticated pricing models—drill down and make sure the accounts are accurately priced. You're also going to see risk managers putting more importance on finding insurers that have solid risk-engineering services to help manage their total cost of risk.  

Jack Roche
President
Business Insurance, The Hanover

As a carrier dedicated to building our business through independent agents, we see many outstanding opportunities in 2012.

First, we see that the best independent agents are seeking to improve their economics by taking a hard look at the value of their current books of business and then creating deeper relationships with fewer key carriers to ensure they are achieving their ultimate business goals. These agents will partner with carriers that align with their core strategies, build mutually beneficial plans to gain competitive advantages and offer other services such as customer-service centers that save an agency's customer-service representatives time so that they can focus on sales. At the same time, they will look for carriers that deliver strong national capabilities through local relationships.

Additionally, there are opportunities for carriers that have done the heavy lifting: investing in the people, products and services that agents need to be successful, which has positioned them to take advantage of emerging opportunities in the marketplace. Those companies whose books of business are not solid now will be especially challenged to perform in the coming year.

Certainly, the trends toward agents seeking more specialized industry and product offerings to complement their increasing sophistication will continue. Companies that have made investments in unique niches and segments, and that offer the professional- and management-liability products to round out those accounts, will reap the benefits.

Peter Eastwood
President/CEO,
Chartis U.S. and Canada

The P&C industry endured more than $100 billion in catastrophe losses in 2011, marking the second-costliest year on record for cat activity. Here in the U.S., insured catastrophe losses totaled more than $35 billion. What remains a major area of concern is the fact that the majority of these losses were either unmodeled or inadequately modeled in terms of peril or geography.

Looking forward into 2012, industry-capitalization levels remain strong, but the uncertain and potentially severe impact of cat risk creates increasing levels of uncertainty for the underwriting community.

The U.S. economy is slowly improving; however, the recovery is uneven both in terms of geographic impact and industry sector. We are seeing improvement in job growth in states like North Dakota, Wyoming, Texas and Louisiana as the result of new energy infrastructure and development. Energy-rich areas of Canada, particularly Calgary and the greater Alberta region, continue to outpace most areas of the U.S. in terms of overall economic growth. We are seeing increased levels of consumer spending, which helps to boost the retail sector.

Additionally, the transportation sector has picked up over the last 18 months, as demand for goods and materials shipped has increased. Each of these areas creates new opportunities for Chartis as they continue to grow and expand.

Mark Butler
President
Distribution and Service Management
Commercial Markets, Liberty Mutual

Commercial-insurance buyers, brokers and carriers face many challenges in 2012, but four stand out in my mind. 

The first is how best to respond to the changing market. The need for change is clear: a poor investment environment, significant catastrophic losses and other loss trends. Equally clear is the benefit: Price adequacy fosters long-term stable markets. Underwriting discipline and buyer awareness of long-term value are critical during these economic times. Making this more challenging is that for some risk professionals, it's the first time they will experience a hardening market.

The second challenge is remaining focused on improving claims outcomes. Controlling the cost of claims is more important in a hardening market. One key to managing costs is to effectively deliver the best possible outcomes. Predictive analytics are critical to understanding how best to manage claims and identify those with the potential to escalate well beyond the norm.

Collaboration and attracting—and keeping—top talent in the industry are the last two challenges. Buyers, brokers and carriers must establish shared goals and work collaboratively to ensure mutually beneficial partnerships. Recruiting, training and retaining the best and brightest will drive our individual and collective success.