Speaking before the Association of Professional Insurance Women and the New York Chapter of CPCU in New York recently, Mr. Duperreault explained: "We're in uncharted waters now. For at least some time, we will be in an environment in which premium rates are rising but underlying exposures are declining.… Hence, an 'invisible' hard market," which will be unlike any we have experienced in the last 50 years, Mr. Duperreault added.
He said the invisible hard market will become visible only when we experience at least one of the following:
* the economy gains strength and exposures begin to rise;
* carriers' investment income normalizes; or
* a major insurable event occurs.
A Defense of Enterprise Risk Management
Mr. Duperreault also defended the concept of enterprise risk management (ERM) from critics who contend that the current financial crisis represents a failure of ERM.
"ERM, or risk management, did not fail. It was either not understood or applied incorrectly. And the cumulative effect of that misunderstanding or misapplication has exacerbated the current crisis," Mr. Duperreault said, adding that companies that properly applied ERM were able to avert disaster.
He cited examples of companies that effectively used ERM by observing what models indicated and using sound judgment and analysis to guide decision making.
"ERM is a concept that needs to be enhanced and enforced, not abandoned. If you bring no other message to your clients about this current crisis, I would urge you to take this to them. It is important that we not throw the baby out with the bathwater," he concluded.