What’s New? Not Much for Insurers and Reinsurers, Lots for Lawyers

April 8, 2010

Consider the Risks: An Insurance Law Blog

In many respects, it has been a slow news time for commercial insurers and reinsurers. For example, Advisen reports more of the same for 2010: soft market, excess capacity. Apart from recent developments involving Chinese Drywall that could have substantial impact for the insurance/reinsurance industry, there have been few major developments. For lawyers, however, including those who provide litigation and arbitration services to insurers and reinsurers, its more like slow burn than slow news.

Although the general economy seems to be improving, employment in the legal sector continues to suffer, albeit at a slower rate than last year, as reported this month by the Bureau of Labor Statistics. This is consistent with anecdotal reports, including comments at a recent insurance coverage conference by a representative of a large U.S. reinsurer.  The representative stated that it had only a handful of open reinsurance arbitrations, and most of those were being resolved “on the papers” and without evidentiary hearings. While there may be a thousand data points of light that illuminate this phenomena, one that caught this writer’s attention was a recent report by a prominent association of reinsurance arbitrators showing a 32% decline in enrollment for the golf tournament associated with its spring meeting, and an 8% decline in overall enrollment for the meeting. In addition, colleagues in other firms report continued sluggishness in the demand for legal services in litigation and arbitration.

These statistics suggest the continuation of a major trend widely reported last year, away from big litigation and big arbitration cases run on both sides of the “v.” by lawyers working for “big law.” Corporations, including insurers and reinsurers, have focused intensely on controlling costs. This has been accomplished in a variety of ways, including by bringing case management and litigation document management in house, by finding lower cost legal service providers, and by exploring alternative fee arrangements. In the continuing big law shakeout, it is likely that cost-conscious insurers and reinsurers are willing to reconsider the “nobody ever got fired by hiring the biggest (and most expensive) provider” syndrome. Instead, those insurers and reinsurers who are focused on value are beginning to understand that there are many creative and cost-conscious lawyers at midsized and small firms who can leverage technology and experience to deliver the same or better results at a fraction of the cost. If this means a more level field of battle, for this writer, let the battle begin.

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