NU Online News Service, Jan. 21, 2:53 p.m.EST

NEW YORK—If producers were hopeful that a turnaround inthe soft market would take place this year, they will be sadlydisappointed, as a combination of factors points to a continuationof the current conditions, said Chartis’ U.S. chief executive.

Speaking yesterday during the Professional Insurance Agents ofNew York’s (PIANY) MetroRAP (Metropolitan Regional AwarenessProgram) here, John Q. Doyle, president and chief executive officerof Chartis U.S. and executive vice president of Chartis Inc., saidthere is a combination of economic and insurance market factorsconspiring to keep the current soft market intact through the restof this year.

“This is a truly challenging time for us in the [property andcasualty] industry,” said Mr. Doyle.

The industry’s combined ratio stands somewhere around 107-108for last year as insurers continue to feed off of the good yearsand use their surplus. That use of surplus will continue throughthis year, Mr. Doyle said. He added that he expects the surpluswill “dry up in a meaningful way” through this year.

The industry has a record surplus of $550 billion in support,said Mr. Doyle. A significant amount of that capacity, he noted,came from the anticipated floundering of Chartis (which is asubsidiary of American International Group) and other insurers whowere experiencing economic trouble. Some in the industryanticipated that the major insurers would falter and open themarket for other carriers. Because that did not happen, it led tothe record supply of capacity that is still being utilized.

Mr. Doyle also noted that loss cost inflation and low yieldsfrom investments will also impact the earnings of the p&cindustry.

Additionally, he said the economy is also pressuring prices,which has led to a supply and demand imbalance.

“What does that mean for the pricing side for 2011? Unless wesee some level of discipline in our business…my sense is thatbusiness will remain somewhat competitive for 2011,” Mr. Doylesaid.

When asked during a question and answer period when a marketchange would come, Mr. Doyle said “we would have to see anextraordinary event to see the scales tip in a differentdirection.”

He noted, too, that while he has seen some “stupid”underwriting, generally the markets are acting responsibly throughthis soft market cycle. He added, however, that investors areanxious to see a better return on their investments that were oncein the double digits back in the 80s and now stand at singledigits.

Directing his comments to specific ends of the business, on thecommercial side, which accounts for 80 percent of Chartis’business, he said unemployment remains a key obstacle to improvingresults. There are some pockets of improvement, but the overallclimate is not robust, he said.

“[It is] a mixed bag from an economic point of view,” said Mr.Doyle. “Seeing some recovery on the consumer lines side and[commercial lines] side remains challenging, and that imbalance isexpected to continue.”

Regarding personal lines, there is some uptick taking placethere, he pointed out, as affluent customers are beginning to spendmoney again and purchase insurance to cover assets. He said linessuch as accident and health, travel related, and extended warrantycoverage are experiencing improvements.

Touching on the issue of regulation, he said it is too soon toknow what impact the changes in federal law will have on theinsurance industry. However, he urged the agents and brokers in theroom to make certain that those who do regulate the industry beknowledgeable about the business.

“We have to speak loudly and have to make sure that our voice isheard,” Mr. Doyle advised. “We have got to make sure that thepeople who understand our business regulate us.”