Editor’s comment – Predicting the forecasts for 2014

Forecasting in the insurance world usually revolves around pricing – will it go up, will it go down? The nature of the underwriting cycle means that this forecasting is usually reasonably accurate – lack of claims, more capital, prices down, and vice versa. And it can be quite line-of-business specific.

Occasionally, something happens that dramatically turns the market – a massive hurricane, a major terrorist attack, or an oil rig going up in flames. Big hurricanes used to turn the market – Hugo, Andrew, Katrina etc. Now they tend to only turn the US excess of loss catastrophe market. But a major land-falling hurricane in the US could still have a huge impact, especially if Miami or New York were hit.

So the good news is that 2013 was the quietest US Atlantic hurricane season for over 30 years. Indeed, the 2013 Atlantic hurricane season ended without the formation of a single major hurricane and with the fewest named hurricanes since 1982. Which, according to experts, will result in a low double-digit fall in related catastrophe reinsurance pricing in the 2014 renewals.

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The less good news is that other areas of the world have been particularly badly hit by natural catastrophes in 2013, including wind storms and flooding in Europe, Canada and Australia. But there was no mega catastrophe to turn the market, and overall, reinsurers are said to be expecting renewals to be steady and stable. So there shouldn’t be any dramatic impact on insurers’ pricing. Risk managers can rest easy that they shouldn’t be hit by dramatic price increases (unless they are operating in areas hit by catastrophes in 2013, or have a terrible loss record).

And while we are on the subject of forecasting, here are International Programme News’ Top Ten predictions for 2014:

1. Global programmes will be as complicated and time-consuming as ever to implement
2. Revenue authorities will continue look to recoup as much tax money as humanly possible.
3. Buyers will continue with demands for a black and white compliance database.
4. Insurers will continue to point out that global programme compliance isn’t black and white.
5. Insurance lawyers will continue to rake it in due to the grey areas.
6. IPT will increase, somewhere.
7. IPT will be introduced, somewhere, for the first time.
8. No new global insurer, with operations in most countries worldwide, will appear in 2014
9. More insurers and brokers will claim to be a truly global player.
10. All in the global programme sector, including insurers, buyers, brokers and service providers, will continue to require up to date information on cross-border insurance and global programmes.

Season’s Greetings and a very Happy New Year!