It should come as no surprise that the outlook for the economy was top of mind at the AIFA conference.
I heard a number of investors ask open-ended questions aimed at assessing management’s overall level of optimism about 2010 and beyond, which I view as a good sign. Those questions were looking for insight into both insurance operations and the investment portfolio.
On the insurance front, questions about the economy’s effect on pricing and exposures are sure to continue. Here are a few other topic areas that may generate questions in the coming months:
- Inflation trends, specifically related to setting and evaluating reserves.
- Relationship of the “side effects” of economic weakness to potential loss trends. For example:
Effect on frequency of deferred maintenance by policyholders or
Effect on severity as the “less experienced” return to the workforce.
- Underwriter compensation, which leads to two very different follow-up questions:
How underwriting discipline is monitored or
How a company retains underwriters when their compensation drops because of the formula used.
Beyond the economy, discussions at AIFA confirmed that investors are looking at the potential risks of the changing judicial and tort environment. I looked at the communication implications of tort (un)reform after the NYSSA Insurance Conference in February.
I hope these ideas are helpful. I will be adding detailed posts on a few other topics in the next several days.