Post Europe: View from the Top - More to a market than hard or soft

But whether the bulls or bears are correct should not and will not determine the future health and profitability of the insurance market; the opportunities to expand product portfolios in Europe and write business profitably exist despite market conditions. There is no need to wait for a market turning event.

Prior to the disasters in Japan, Australia and New Zealand the everlasting soft market held sway, with many established carriers bemoaning naïve or opportunistic new entrants diluting quality and price. Really?

Simple reality
Of course, stories benefit from a simple hero/villain narrative but the reality isn't quite so simple. In any walk of life there are opportunists, but the real long-term story in our industry is the need from both buyers and brokers for innovation and new products.

Look at some live examples: many insurers are currently looking to enter into the professional and management liability market. The SME sector, in particular, is seen as one of great potential; it is a growing area of the European economy, leading recovery as we exit recession, and many SMEs are currently non-buyers of directors' and officers', employment liability practice insurance or public liability.

"The opportunities to expand product portfolios in Europe exist despite market conditions".

Duties to shareholders
But with the financial crisis reminding businesses of their duties to shareholders, although most SMEs are not vulnerable to the same sort of exposures that arose during the downturn, many are increasingly aware of the threats that exist. The pool of insureds is expanding.

However, the challenge for the market is not just to deploy capacity; it is to provide expertise and products relevant to buyers. Cover, price and utility that makes sense for the way SMEs operate is needed, not necessarily cut down versions of existing policies for larger firms.

Focus on the buyer
Products that address the needs of the market can come from the establishment or new entrants, the focus is not on the provider's heritage, but on the product and the buyer. But if the existing market is reluctant to take the necessary steps, a challenge to the status quo may be necessary.

Is that naïve? Well it's not naïve to address buyers' needs. That's just good business practice, especially when it comes to emerging risks.

"The pool of insureds is expanding."

Growing segments
For example, privacy and network security risks are arising from some of the fastest growing segments of the economy - information technology, life sciences, medical devices and healthcare. There is certainly room here for more knowledge and expertise to develop viable new products.

Indeed, new entrants using the latest technology can bring many advantages over the establishment, just look at how the internet and direct insurers have revolutionised the personal insurance sector.

Room to expand
So there is certainly room for new, enhanced product portfolios to expand without diluting quality. The market environment currently is difficult, it always will be. But for those who have the expertise and drive to meet the needs of the buyer, the ability to write profitable business is there, whatever point in the insurance cycle we find ourselves.

The bad news for the establishment may be that a nimble new entrant may just be best placed to respond.

Dermot O'Donohoe is European chief executive and chief underwriting officer for global specialty at Torus