Insurers in Canada and worldwide face a “heavy cocktail” of challenging issues in 2011: Lloyd’s North American director

Reflecting the global insurance market generally, Canada’s property and casualty market is facing a “heavy cocktail” of very challenging issues in 2011, according to Sean McGovern, director of North America and general counsel of Lloyd’s.McGovern spoke to Canadian Underwriter at an event marking the opening of Lloyd’s Toronto office on Nov. 30.McGovern answered questions about many different issues facing property and casualty insurers, including the pressure to produce an underwriting profit in a low-growth environment, the impact of low interest rates, a flurry of activity among global regulators in the wake of the global financial recession and the potential inflationary pressures facing insurers around the globe. “You couple the underwriting environment with the regulatory environment, the investment environment, and then you look at what the inflationary environment might do in the long run to claims, that’s a pretty heavy cocktail of issues for an insurance industry to be facing,” he said. “I don’t think Canada is any different than anywhere else in the world [in this regard].”The global financial crisis, which reached a peak in 2008-09, raised some questions around the world about sovereign debt as an investment product, McGovern added. His observation comes just after Ireland made a request for financial aid from the European Union in late November.”With the instability we’re seeing in some pretty-well-established currencies at the moment, in Europe in particular, there are still a lot of questions about the assumptions we make about sovereign debt over the years and the stability of sovereign debt as an investment product,” he said. McGovern said Lloyd’s conservative investment philosophy “served us very well through the crisis.” He noted Lloyd’s has “almost no equity exposures. We’re a third cash, third government bonds and a third corporate bonds.”