Adjusting to new norms and a new reality: SIRC chair Haushofer

The reinsurance industry in Asia is being pushed out of its comfort zone in every sense. But its executives must shake off any digital fatigue and focus on what is important: making sophisticated pricing models an operational reality, Marc Haushofer, the chairman of the Singapore Reinsurers’ Association and host of SIRC 2020 Re-Mind, told Intelligent Insurer.

What have been the challenges of pivoting to a digital event this year?
Given that the COVID-19 lockdowns worldwide have forced practitioners to work remotely from home, and engage in numerous online meetings and webinars, there was some initial resistance when they were informed that SIRC would be going virtual.

However, what was most challenging was to overcome their digital fatigue and open the minds of our partners to see the many possibilities of virtual events and platforms such as SIRC 2020 Re-Mind in the post-COVID-19 market landscape.

Are you pleased with how it has come together?
Yes, I am very pleased with what we have achieved so far, given the very short time that we have had to put all this together—the programme, the technical details with the virtual environment, and garnering the support from our partners. It’s not done yet, there’s still the actual execution of the sessions.

We have to ensure that all our stakeholders—delegates and partners—are able to have a productive virtual experience when accessing to the platform on November 2 and thereafter. It will be great reward for us as the driving force behind this experience if everything works as planned. I’m glad that we left our comfort zone and decided to go for it!

What will be the main themes of the event?
Unlike previous in-person SIRCs, there is no central theme for the SIRC 2020 Re-Mind virtual event. Nevertheless, you will have seen from the conference programme that our co-host Swiss Re will be presenting three panel sessions: “Digitisation of Insurance”; “De-risking Global Supply Chains”; and “Managing Climate Change”, which are all very topical and somewhat connected to the pandemic that will continue to shape public opinion going forward.

Without letting the cat out of the bag, I believe issues such as the industry’s response to pandemics or other systemic risks, sustainability, and the future of work, will probably feature in some of the discussions during the virtual event.

The industry icons Denis Kessler and Christian Mumenthaler will enthuse us with their views.

What are the main challenges facing the global re/insurance markets?
COVID-19’s impact on reinsurers has been wide-ranging, in terms of both scope and time. Event cancellation, business interruption, and the drop in travel insurance premiums are the immediate bearings we have seen, while its impact on trade credit and D&O liabilities is expected to show at a later stage.

In the longer term, we could be seeing more riots and strikes as COVID-19 has further widened the income gap, increasing tension in our society.

Another challenge that will stay with reinsurers for a long time—if not forever—is climate change. We are seeing increasing insured losses from typhoons, rainfalls and bushfires, these events have grown in frequency and intensity.

Our industry has to respond with an adjustment of risk pricing to reflect the corresponding changes in adverse results and loss trends. In addition, the ongoing ultra-low interest rate environment has contracted the investment income for reinsurers.

This is not going to get better any time soon as the Federal Reserve has hinted that interest rates will stay low in the near future. The list of challenges to our industry can easily get expanded, but it is crystal clear: the market has to visibly harden to assume all these risks in a way that the required capital finds attraction to support it.

How have these manifested themselves in the Asian region in particular?
Asia is home to the world’s fastest growing reinsurance markets, so it is not spared from any of these challenges, especially the impact of climate change. For instance, Japan has been hit by very strong typhoons in 2018 and 2019, resulting in huge insured losses. The continually rising sea level is another pronounced concern as many Asian mega-cities are sited next to the ocean.

In line with the current global pricing sentiment, changes are afoot even though they may happen at a slower pace, compared to the US as an example. After years of inadequate returns to cover the cost of international capital, I see the region gradually applying firmer pricing.

By highlighting only the Asian growth opportunity we’re not giving appropriate weight to the complex pricing challenges attached to the hard-to-predict impact of urbanisation and chaotic weather in this part of the world. Asia-Pacific reinsurers had a rough ride and will now have to bring more sophisticated pricing models into operational reality. At the end it’s bluntly simple: we must set the right goals, stay focused and make some money.

What are the opportunities for growth in the region?
Unlike most Western countries, the Eastern hemisphere houses a large number of unsaturated market places. In addition, China has become the world’s second largest economy in less than two decades. While COVID-19 has certainly dampened the impressive growth we saw in many parts of the region, the underlying dynamics are still intact and healthy.

The fairly low insurance penetration presents an opportunity on its own. With a rapidly expanding middle class in the region we’ll see a rise in consumer-related coverages in addition to the traditional lines of business such as nat cat.