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Column: Roger's Soapbox

The Underwriting Cycle Lives

By: | October 12, 2017 • 2 min read
Roger Crombie is a United Kingdom-based columnist for Risk & Insurance®. He can be reached at [email protected]

Here’s a joke. Why are they called pirates? Because they arrr.

Here’s another: Early last year, one of the global brokerage houses announced the imminent death of the underwriting cycle. “The inflows of new, lower-cost capital are helping to moderate (and perhaps kill) the reinsurance market cycle,” the broker stated, with all the authority that billions of dollars and acute market smarts could muster.

The broker has tens of thousands of employees and global clout, whereas I’m just a dude with a bad outlook. But I’ll tell you this much: The cycle is not dead. It’s resting.

The broker stated that a fall in U.S. property/casualty premiums as a percentage of GDP was evidence of the imminent end of reinsurance, showing up as “a proxy for the impact of the industry on the overall economy.”

The cycle is not dead. It’s resting.

The broker rated catastrophe models and “radical improvements in the technologies available to deploy capital very quickly, as and where needed” as the two most significant factors leading to the downfall of reinsurance.

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Funny, that. The same company bleated about disintermediation in the 1930s by what was then called “alternative capital.” Today’s version of alternative capital is to be credited with taking down the reinsurance market.

The death of reinsurance, the broker said, feeds the growth of the ILS market. If companies would only abandon reinsurance and wholly embrace ILS, the broker said, greater stability could be guaranteed. Ha!

Too much money, allied to a pause of some years in heavily insured catastrophes, has been chasing too little understanding of business risk (e.g. cyber). A lull in economic proceedings always brings out forecasts of doom.

Then came this summer. I doubt the broker still thinks the underwriting cycle is over. Rather, with some ILS instruments being wiped out as the winds blew and the rains deluged, the cycle remains intact.

It was diminished somewhat as vast pools of capital sought better returns than have been available in interest-bearing accounts. Given the political and economic damage that might attend a meaningful raise in interest rates, they are stuck. Capital otherwise idle, or at the very least relaxed, has had to work for its living.

Big money seeks non-correlated alternatives, which is another joke. My fingers aren’t correlated to my toes, but soon after I fall off a tall building, their correlation would become apparent. In the early 2000s, what seemed to some a sensible conclusion, “the end of history” was declared and with it ever-expanding wealth for all. That opinion held water right up to 2007.

The inherent nature of markets does not, and will not, change in the short term. Harvey, Irma, Jose, the quake in Mexico and any other catastrophes that may occur between my writing this and your reading it, are a reversion to the norm, proof that the underwriting cycle lives on. Because what goes up must come down, and vice versa.

And that’s no joke. &

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The Profession

Curt Gross

This director of risk management sees cyber, IP and reputation risks as evolving threats, but more formal education may make emerging risk professionals better prepared.
By: | June 1, 2018 • 4 min read

R&I: What was your first job?

My first non-professional job was working at Burger King in high school. I learned some valuable life lessons there.

R&I: How did you come to work in risk management?

After taking some accounting classes in high school, I originally thought I wanted to be an accountant. After working on a few Widgets Inc. projects in college, I figured out that wasn’t what I really wanted to do. Risk management found me. The rest is history. Looking back, I am pleased with how things worked out.

R&I: What is the risk management community doing right?

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I think we do a nice job on post graduate education. I think the ARM and CPCU designations give credibility to the profession. Plus, formal college risk management degrees are becoming more popular these days. I know The University of Akron just launched a new risk management bachelor’s program in the fall of 2017 within the business school.

R&I: What could the risk management community be doing a better job of?

I think we could do a better job with streamlining certificates of insurance or, better yet, evaluating if they are even necessary. It just seems to me that there is a significant amount of time and expense around generating certificates. There has to be a more efficient way.

R&I: What was the best location and year for the RIMS conference and why?

Selfishly, I prefer a destination with a direct flight when possible. RIMS does a nice job of selecting various locations throughout the country. It is a big job to successfully pull off a conference of that size.

Curt Gross, Director of Risk Management, Parker Hannifin Corp.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

Definitely the change in nontraditional property & casualty exposures such as intellectual property and reputational risk. Those exposures existed way back when but in different ways. As computer networks become more and more connected and news travels at a more rapid pace, it just amplifies these types of exposures. Sometimes we have to think like the perpetrator, which can be difficult to do.

R&I: What emerging commercial risk most concerns you?

I hate to sound cliché — it’s quite the buzz these days — but I would have to say cyber. It’s such a complex risk involving nontraditional players and motives. Definitely a challenging exposure to get your arms around. Unfortunately, I don’t think we’ll really know the true exposure until there is more claim development.

R&I: What insurance carrier do you have the highest opinion of?

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Our captive insurance company. I’ve been fortunate to work for several companies with a captive, each one with a different operating objective. I view a captive as an essential tool for a successful risk management program.

R&I: Who is your mentor and why?

I can’t point to just one. I have and continue to be lucky to work for really good managers throughout my career. Each one has taken the time and interest to develop me as a professional. I certainly haven’t arrived yet and welcome feedback to continue to try to be the best I can be every day.

R&I: What have you accomplished that you are proudest of?

I would like to think I have and continue to bring meaningful value to my company. However, I would have to say my family is my proudest accomplishment.

R&I: What is your favorite book or movie?

Favorite movie is definitely “Good Will Hunting.”

R&I: What’s the best restaurant you’ve ever eaten at?

Tough question to narrow down. If my wife ran a restaurant, it would be hers. We try to have dinner as a family as much as possible. If I had to pick one restaurant though, I would say Fire Food & Drink in Cleveland, Ohio. Chef Katz is a culinary genius.

R&I: What is the most unusual/interesting place you have ever visited?

The Grand Canyon. It is just so vast. A close second is Stonehenge.

R&I: What is the riskiest activity you ever engaged in?

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A few, actually. Up until a few years ago, I owned a sport bike (motorcycle). Of course, I wore the proper gear, took a safety course and read a motorcycle safety book. Also, I have taken a few laps in a NASCAR [race car] around Daytona International Speedway at 180 mph. Most recently, trying to ride my daughter’s skateboard.

R&I: If the world has a modern hero, who is it and why?

The Dalai Lama. A world full of compassion, tolerance and patience and free of discrimination, racism and violence, while perhaps idealistic, sounds like a wonderful place to me.

R&I: What about this work do you find the most fulfilling or rewarding?

I really enjoy the company I work for and my role, because I get the opportunity to work with various functions. For example, while mostly finance, I get to interact with legal, human resources, employee health and safety, to name a few.

R&I: What do your friends and family think you do?

I asked my son. He said, “Risk management and insurance.” (He’s had the benefit of bring-your-kid-to-work day.)

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]