P/C Insurance Execs Foresee Commercial Lines Growth, Led by Cyber, Outpacing Personal Lines

Leaders of the property/casualty (P/C) insurance industry expect to see a considerable increase in the commercial lines of insurance for 2017, with cyber leading the way as a huge untapped market, according to an Industry Leader Trends survey, conducted by the Insurance Information Institute (I.I.I.) at its recent Property/Casualty Insurance Joint Industry Forum.

Fifty-five percent of respondents said they expect that commercial lines will grow more in 2017 than personal lines. Moreover, 88 percent said that cyber would grow faster than the rest of the P/C industry.

“This is not surprising given businesses within personal data-driven industries, such as healthcare, finance and banking, retail, and communications view cyber risk as a real threat,” said Steven Weisbart, senior vice president and chief economist with the I.I.I. “Growth in the cyber insurance market will also be driven by increasing demand for business interruption coverage.”

With Congress weighing various proposals to change the Dodd-Frank financial regulations, which was enacted in 2010, leaders were asked which proposals they would support. Forty-five percent said they would most likely support reform or elimination of regulations involving Systemically Important Financial Institutions (SIFIs). Other choices were to reform or eliminate the Federal Insurance Office (FIO); Financial Stability Oversight Council (FSOC); or Consumer Financial Protection Bureau (CFPB).

Respondents were also asked which state-based regulatory or policy trends they were most concerned about. Thirty percent said increased restrictions on underwriting; 23 percent said solvency regulation; 23 percent said multiple/duplicative data calls; and 10 percent said workers’ compensation opt-out legislation.

When asked what issues would be the most important to P/C insurers in 2017, 43 percent were focused on attracting the next generation of talent and skills to the P/C industry. Twenty-three percent said technology is of concern, particularly showcasing the benefits of the digital era for insurance consumers. Another 23 percent said the regulation of insurance companies increasing the costs and the complexity of doing business.

Leaders were also asked what they think will be the key cause of mergers and acquisition activity in 2017. Fifty percent said the need to achieve economies of scale.

“Size can bring economies of scale when certain costs, such as regulatory costs, are increasing,” Weisbart said “Companies are also concerned about the need to diversify across product lines,” he said, noting 27 percent of leaders raised that issue. “Lack of diversification could result in highly volatile earnings and decreasing profitability for insurers.”

The Property/Casualty Insurance Joint Industry Forum included nearly 200 representatives from P/C insurance and reinsurance companies and organizations.