Delegates are approaching the 46th International Insurance Society (IIS) annual seminar with some degree of confidence and optimism. The insurance industry has ridden out the financial storm with aplomb compared to the banking world. Investments have rebounded and the quarterly financials of most companies have returned to profit despite an unprecedented level of catastrophe losses in the first part of the year.
The losses appear manageable – although the magnitude of claims from the Deepwater Horizon oil rig disaster is still to be fully quantified – and could help stem a softening market. All in all, insurers are feeling pretty pleased with themselves.
Mike Morrissey, president and CEO of the IIS, who is hosting his first annual conference since taking over from Patrick Kenny in 2009, remembers that conditions were very different at last year’s event, held in Jordan.
“Last year the mood among delegates was quite sombre. People are feeling a little better now,” he says.
Brian Duperreault, president and CEO of Marsh & McLennan Companies and chairman of the IIS, is expecting a much more optimistic mood among delegates at this year’s event.
“It is hard to be more pessimistic than last year. Naturally people are feeling better. The recovery has definitely started on a global basis,” Duperreault tells Reactions. “But there are still a lot of issues out there, such as sovereign debt, which need to be worked through.”
Duperreault’s caution is well merited. While the subject of the upcoming IIS seminar looks at the aftermath of the financial crisis with some degree of optimism for the industry, many countries, not least those in Europe, are still gripped by economic turmoil.
Greece is in desperate trouble. On May 10, emergency measures worth €750bn ($975bn) were agreed to prevent the Greek debt crisis from affecting other countries in the Eurozone. Without the bailout, which includes €250bn support from the International Monetary Fund, the euro could have come under increased pressure as a result of investors growing concerned about other financially troubled countries such as Portugal and Spain.
Spain, which hosts this year’s IIS meeting, has financial troubles of its own. According to first-quarter figures, unemployment in Spain stands at 20.05% – the highest in the eurozone – and the country is attempting to cut its budget deficit by a further €15bn by 2011.
In April, Standard & Poor’s (S&P) downgraded Spain’s longterm credit-rating by one notch to double-A, making Spain the third eurozone nation to be hit with an S&P downgrade in just two days, following steeper cuts on Portugal and Greece.
Morrissey accepts that this will cast a shadow over the event, which will be held in Madrid from June 6 to June 9.
“We are aware we are holding conference in a country that is having a hard time at the moment. It may have an impact on the level of local attendance. This is not a particularly celebratory time in Spain,” says Morrissey.
The Spanish insurance industry has not been immune to the problems of the country. Following S&P’s decision to downgrade the Kingdom of Spain, the rating agency revised its outlooks on Spain-based reinsurer Mapfre and related core operating subsidiaries to negative from stable.
“Our outlook revision reflects the deteriorating quality of investments available in Spain and, in particular, our negative outlook on Spain and its sovereign debt,” said S&P’s credit analyst Angelo Sacca.
Despite the recent problems, Morrissey is still very positive on the overall health of the Spanish insurance market.
“The last time we were in Madrid was in 1994. The Spanish insurance industry has distinguished itself since then and we are proud to go back there,” he says. “The Spanish insurance market is strong and has shown itself to be stronger than the banking industry.”
Duperreault says it will be impossible to ignore the environment in Spain, and that it should have some influence on the feel of the event. “It will certainly be in stark relief to what is happening in the wider insurance market. We will be discussing issues in a Spanish context,” Duperreault says. “How it affects the European insurance industry will be interesting.”
Past IIS seminars, such as the past two events held in Jordan and Taiwan respectively, have tended to focus on issues associated with the regions they are being held in. Morrissey says this event will have a more global outlook,
“It is already clear that we have delegates from more than 60 countries. There are more people coming from China and India. So it will have a rather balanced global flavour,” Morrissey says. “On virtually every panel we have representatives from Asia, Europe, and the US.”
No place like it
Morrissey is confident of a relatively high turnout at this year’s event.
“Last year we were in the Middle East and it was shortly after the financial crisis so attendance was lower,” he says. “This year attendance is running higher at around 550 people.”
And it is hoped that the European location will attract more delegates from the London insurance market. While the IIS is well attended by delegates from around the world, criticisms have been leveled at the UK for its poor level of attendance at past events. This year’s seminar includes heavy hitting speakers from the US, Europe and Asia – such as Hank Greenberg, CEO of CV Starr, Stefan Lippe, CEO of Swiss Re, and Ikuo Uno, chairman of Nippon Life Insurance Company.
But there are no industry heavyweights from London or the UK.“What is disappointing is that London is not represented as strongly as it should be. It doesn’t reflect the importance of the London market. It needs to be better represented,” says Clive O’Connell, partner at Barlow, Lyde & Gilbert and general counsel for the IIS. O’Connell says there is an incorrectly held view that the IIS is biased towards the US.
“There is a wrong perception that the IIS in an US organisation. It is not. The IIS is a valuable organisation and London ought to play a part in it,” O’Connell says. “The Spanish are there, the Europeans are there and the Americans are there meeting and greeting and making contacts. They are influencing discussion groups.”
But O’Connell is confident there will be an increase in delegates coming from the UK for the forthcoming seminar. “There are more people from the UK going to Madrid than Amman or Tapei [the previous two IIS meetings. Simple economics dictate that. That said, there is no delegate of the importance of Mapfre’s José Manuel Martínez,” he says.
O’Connell accepts that there are many other calls on peoples’ time. One reinsurance broker once joked that if they wished they could attend a different conference almost every day of the year. But Duperreault is in no doubt that if a decision has to be made about which event to attend, the IIS should be near the top of that list.
“We are a forum where people can hear and express their points of view. There is no place like it, where you have industry leaders, academics and regulators. I don’t know of any place where a gathering like that occurs,” he says. “The organisation brings so many geographical vantage points together. They will all have their own unique perspective.”
Evergreen topics
This year, speakers and delegates will be bringing their perspectives to bear on issues associated with the aftermath of the financial crisis, with a global leaders panel on the road to recovery, and panels on regulation, systemic risk, risk management and emerging markets.
One of the biggest talking points for the insurance industry that has come out of the financial crisis is the spectre of being placed under onerous regulation aimed primarily at banks.
The IMF has proposed a double bank levy, which will hit insurers, while the US and UK also have a raft of legislative proposals under consideration. Morrissey says this will naturally be an important theme.
“We have several evergreen topics that are always on the agenda and that will have a flavour of recent developments like regulation,” he says. “Discussions around regulation will focus on attempts to more aggressively regulate the industry and whether they should be thrown in the same bucket as banks.”
Duperreault says the argument of the panel will be that there needs to be a reason for changing the regulation of the insurance industry when it cannot be held directly responsible for the causes of the financial crisis.
“Regulation around the property/casualty industry has been quite effective. We in the industry want to make sure everyone understands that it was effective. Part of the theme is to recognize what how the industry has performed,” Duperreault says.
However, Morrissey says that the IIS is not a lobbying organsisation and that discussion will be on an academic level rather than beating the drum for the insurance industry.
“We don’t want to get into the politics of the financial crisis,” says Morrissey. “We want to look at the impact on industry – the negative impacts and the positive impacts. There will be opportunities for new product development.
“There are a number of insurance organisations around the world, lobbying organisation, regional organisations, and organizations that cater for special lines of business. We are a global organisation and are not in advocacy position,” he adds. “Because the IIS is made up of academics we need to have intellectual objectivity.”
By Richard Crump – rcrump@euromoneyplc.com