COO report - Modelling concerns

The increasing reliance on modelling as a means of maintaining underwriting discipline has emerged as a major concern of senior industry management.

Other key issues to emerge from the findings of the first survey of insurance and reinsurance chief operating officers by Ernst and Young, COO Agenda, included worries over: the continuing volume and rigidity of regulation; the need to manage the current soft cycle; and scepticism that brokers are really amenable to market reform.

According to the survey, COOs felt uneasy about the current overeliance on modelling by underwriters, and "questioned the belief, currently held in some areas of the market, that modelling would lead to more underwriting discipline and a different cycle, in terms of length and volatility, to those seen previously".

That managing the current soft market is a high priority for COOs is beyond doubt. When questioned as to what the top three issues facing the market and their particular organisation would be over the next year, nearly all respondents ranked management of the cycle as their number one individual and market issue.

Despite the public commitments that have been provided across the industry on issues of market reform, it seems that COOs are a sceptical lot, especially when it comes to brokers, where it was felt that a clear dividing line had emerged "between the aims of management to support market reform and those on the ground responsible for implementing change". Acknowledging that a strong lead has been provided by broker management over issues of reform, they were nonetheless "less convinced that the day to day actions of employees were supportive of market reform".

In general, it seems there is a long way to go for the industry to accept the role of the COO itself, with only a small minority of respondents believing their role was understood below the executive team, and 55% feeling their role was only partially understood.