As a part of the AAIS Pulse: Chicago presentation, Stefan Holzberger, Chief Rating Officer & Senior Managing Director with AM Best, sat down with AAIS's VP of Products, John Kadous, to discuss issues that are currently putting pressure on property casualty insurers and their bottom lines. Those issues included COVID-19, the economy, inflation, interest rates, global warming and natural catastrophe losses, international geopolitics, and more.
The conversation looked closer at insurers' financial health, potential ratings actions, as well as what AM Best is looking for from insurance executives facing stiff headwinds in the market.
Kadous opened up with "Let's discuss the elephant in the room...Ian in the Florida marketplace." He asked Holzberger what he thought was next for the Florida marketplace, one that was struggling before, but now much more so after Hurricane Ian. Holzberger stated, "No doubt...the assignment of benefits issues, the rampant fraud, the incredible amount of litigation...Florida counts for 8% of the claims in the U.S., but 79% of the claims that are litigated, which is insane."
Next, Kadous stated Ian hit at a time that the U.S. insurance market was facing a number of other macro issues. What are the big challenges that insurers are facing today? "Looking more broadly, the investment market volatility has been a challenge for some organizations," shared Holzberger. "A period of interest rate rises can sometimes be a good thing for insurance market, but rapidly rising interest rates hurts the valuation of fixed income portfolios."
When asked about what other headwinds we should be aware of moving into 2023, Holzberger joked "There are plenty!" He went on to say "Definitely we have climate change, an increase in the frequency and severity of natural catastrophe activity whether it's primary perils or secondary perils (tornados, hail, straight line winds, wildfires)," He also touched on other headwinds to watch for including the inflation environment, the shrinking reinsurance/ILS capacity, and definitely cyber attacks.
To view the full interview from Stefan Holzberger and John Kadous, please click the video above.