Hiscox USA CEO Ben Walter recently spoke with Senior Editor Mark A. Hofmann about the state of the property/casualty marketplace and what failure to reauthorize the federal government's terrorism risk insurance backstop might mean.

Q: How would you characterize the state of the commercial property/casualty market right now, and do you see any changes in the new year?

It's trying to decide what it wants to do. I think there was enough momentum in the marketplace to say that the increases we had seen over the last year were going to hold, but not much more than that. Before that, what we were seeing broadly was a mixed bag in terms of increasing firmness still on the dicier areas, but some flat to even softening a bit in areas that had performed really well.

So it was sort of a dichotomous market, and that's where I would have said we would be heading into 2013 until (Superstorm) Sandy, which has thrown a wild card in. The estimates on the loss to the industry have been fluctuating pretty dramatically and still haven't settled. So I anticipate it will certainly have an effect on the property market. It's stopped any talk of declines of any status, and I think we'll see some select firming, especially obviously in the New York Metro area. In the casualty market, I think it stops the bleeding that's been going on, and I think it makes the case for, at worst, a flat year with a continued flight to quality.

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Q: Where does Hiscox USA see growth opportunities?

There are a few select areas that we're really focused on. We're focused broadly on our (errors and omissions) appetite, and that runs across several products. We see a huge amount of opportunity in technology. It's a place that we have played, especially the small and middle-market technology sector. It's growing in the economy, and we have a lot of expertise in it. We wrote one of the first technology E&O policies in the marketplace, and we've been doing it as long as anybody.

You hear a lot of the buzz about privacy and data. We're playing there, too, ... but I think broadly we see a lot of growth there because we have a great form and we know how to underwrite that class well. We have a lot of expertise in it.

The second area in E&O is sort of the targeted professions. Think of all the new economy professions as opposed to the classic E&O areas that are lawyers, accountants and doctors and things like that. Anything that's sort of new economy — consultant, emerging education, all those kinds of areas. We know them very well.

Lastly, health care: We have a health care practice that's been very successful, and we think it's going to continue to grow. We see generally that health care's continuing to be a standout in the economy, and so there continues to be increased demand there and the expertise is valued.

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Those are the three E&O areas where we really expect to see growth. The other area that we're really pushing is our programs area. We have binding authority in the marketplace, and we think we're pretty decent in selecting underwriting talent with the right managing general agents and managing general underwriters.

Q: Hiscox has been a longtime player in the stand-alone terrorism insurance market. Are you concerned the broader terrorism insurance market will suffer major dislocations, if Congress fails to reauthorize the terrorism insurance backstop that's slated to expire in 2014?

Take this with a grain of salt, but if I could predict what Washington was going to do, I would quit my job and do something lucrative with that information. To be honest, we're ready, if and when. In the current budget talks, it would not surprise me if it was one of the things that's going. Although some of the activity of late — especially what's going on in Libya and Israel — has brought some national focus back to the issue of terrorism.

But if they don't renew it, as far as we're concerned I think broadly it helps us more than it hurts us. There's always the issue of the stand-alone market and the bundling and what happens to that, but just broadly speaking, there's enough of the market out there that's currently covered by the backstop that suddenly finds itself without cover that people who are expert and have the appetite, I think, will benefit.