Alarm bells went off in the financial services industry with the onset of the subprime mortgage fiasco in 2007 and the subsequent collapse of Bear Stearns in March of this year. More recently, with the failure of Lehman Brothers, the takeover of Merrill Lynch by Bank of America, the failures of AIG and Washington Mutual, and the shopping around of Wachovia, the industry has taken one body blow after another.
One result is a hemorrhaging of jobs. The American economy as a whole lost 159,000 jobs in September, according to the U.S. Labor Department’s Bureau of Labor Statistics, with more than 17,000 of those jobs in the financial services sector.
Insurance companies, particularly those with heavy exposure to mortgages, haven’t been immune. AIG, one of the world’s largest insurers, lost billions of dollars in the first half of the year, and, when on the verge of collapse, was bailed out by the Federal Reserve. That failure alone could add urgency to calls for more federal regulation of the insurance industry.
While Congress finally passed a bailout bill last Friday, the question is whether it can stop the economy from going into a complete tailspin. Forecasters from the National Association for Business Economics believe the economy is entering a recession and that the $700 billion rescue plan will only “blunt much of the economic decline that might otherwise develop” in 2009. A sharply falling stock market worldwide, still plummeting after the bailout bill was passed, supports this forecast.
So how will this crisis affect meetings in the financial and insurance sector? Fay Beauchine, executive vice president of global meetings, incentives and events, Carlson Cos., suggests that all the corporate restructuring going on could drive companies to the meeting room more often. "It's too soon to tell what's going to happen with [financial and insurance] meetings and incentives,” says Beauchine, “but I see a focus in the short term on more meetings to merge cultures."
Many in the industry believe that insurance incentives will hold up better than other types of meetings. Isabel Mahon, global sales director, Fairmont/Raffles/Swissotel, is relatively upbeat. Business from those companies with substantial exposure to the mortgage mess may have fallen, but Mahon says that her insurance business “seems to be sticking.”
While she’s had some insurance company clients cancel or merge meetings, “my lead pace right now is huge. I’m busier now than I was a year ago.” But she notes that the quick pace is regional. Some of her counterparts on the east and west coasts—the areas hardest hit by the Wall Street crash and the bursting housing bubble—seem to be a little slower in developing leads and completing, while those in the middle of the country have had more success.
For more feedback from industry planners and suppliers on how they are coping with the challenges of the financial crisis, watch for the November/December issue of Financial & Insurance Meetings.
For more articles about how the economy is affecting meetings and conventions, visit the economy section.