The good news to emerge from the first-quarter results recently published by many major European and global insurance groups is that the worst appears to be over.

The financial results may not have sparked a frenzied dash to purchase insurance stocks, because they were significantly marred by further dramatic falls in investment income and more write-downs.

But there was little to suggest that any of the limited number of big insurance groups, aside from American International Group Inc., that insurance buyers rely upon so heavily for coverage is on the brink of disaster.

This news was warmly welcomed by insurance buyers worldwide because the solvency of their insurance providers is at the top of their agenda.

Insurer financial security was the main topic of debate at the two big European risk manager meetings held in Spain and Germany during the first week of May.

Risk and insurance managers discussed a wide range of topics at the annual conference of the Asociacion Espanola de Gerencia de Riesgos y Seguros in Madrid, Spain, and the annual general meeting of the Deutscher Versicherungs-Schutzverband e.V. in Bonn, Germany.

These ranged from the popularity and benefits of enterprise risk management in the economic environment, the ability of insurers and other service providers to deliver new solutions to emerging problems, the role of government in support of insurance buyers in tough lines such as credit and terrorism insurance and, of course, the future shape of risk regulation.

The price of insurance coverage and its likely availability at the coming renewals naturally is also a hot topic, particularly as most insurance buyers are under pressure to at least maintain and, at best, reduce costs.

But the security of the coverage and willingness and ability of the insurers to pay the claims when they fall due is paramount.


During the DVS meeting, Kurt-Georg Hummel, leader of the Solvency II project at Bundesanstalt für Finanzdienstleistungsaufsicht, the German financial services supervisory authority based in Frankfurt, said he believes that the German insurance sector will emerge from the crisis in better shape than other European financial sectors.

While no doubt a comfort to DVS members, one has to bear in mind that Mr. Hummel is likely to believe the German insurance sector is in decent shape because, as a senior executive of the BaFin team, it is his job to make it so.

This is why the two just-published reports by leading credit rating agencies on the health of the European insurance sector perhaps will be more comforting to buyers.

Standard & Poor's Corp. and A.M. Best Co. Inc. said the leading European insurance companies have lost a lot of capital, will continue to struggle with the depressed investment markets, and the insurance companies may suffer further downgrades as a result.

But the rating agencies also said the companies are reasonably capitalized and have sufficiently robust risk management systems that will help them pull through the crisis.

The bad news for buyers is that, because the reserves pot has run dry, there is scarce fresh capital, and reinsurance capacity is hardening rapidly, the only solution left for the insurers is to raise their prices to maintain their ratings.

While it is natural to moan about higher prices, one suspects many will and should be relatively happy to pay a higher price for secure coverage at this stage of the economic and insurance cycle.