The U.S. general and indemnity insurance sector has, despite persistent challenges on many economic fronts, remained financially solid, reports Moody’s Investors Service in their recently released Industry Scorecard.
The New York-based investment services firm stated that while the lower general and commercial insurance pricing, in conjunction with the recent global economic downturn, produced flat or in some cases negative growth for a good number of insurance brokers last year, the insurance industry managed to be successful maintaining its profitability. Moody’s report continued, stating that a combination of variable costs that were proportionally high, service offerings that were valuable, and a lack of investment risk or underwriting were all factors that aided the industry’s efforts to persist in its profitability, despite a decline in revenues in comparison to higher levels from 2008.
The report delineated the different ways that general and business insurance providers and their brokers have approached the challenges in the current market, which included a general slowdown in the pace that acquisitions were taking place, cost cutting measures, and pulling out of operations that were beyond their core markets.
Notable in the report was the end of a ban in the U.S. state of New York this past February that had limited the ability of the largest insurance brokers in their acceptance of contingent commissions; the lifting of the ban could result in a positive affect for the business operations of the brokers in question, even though Moody’s pointed out that some brokers, such as Willis Group Holdings PLC will still persist in the practice of limiting themselves to not accepting contingents. The report delineated its expectations regarding Willis, stating that its expectation for the brokerage firm will be that it will negotiate alternative compensation forms, most likely from commissions with higher up-front compensation.
While copies of the report are free to subscribers to Moody’s, ordering information for non-subscribers can be found at the investment services firm’s website, moodys.com.