Industry must demonstrate its value in a crisis: Inver Re

As the world faces myriad challenges, it’s time for the re/insurance industry to truly demonstrate its value, Steve Hearn (pictured), chief executive officer of Inver Re, told Monte Carlo Today.

“I hope the whole re/insurance industry presents itself as a solution provider,” said Hearn. “We have an opportunity to evidence our capability properly this time around.”

Hearn noted that the world was facing huge challenges, including hyperinflation running across most economies, and the war in Ukraine. However, out of this disruption comes opportunity for the industry.

“I wouldn’t wish those events on anybody but we have the opportunity to demonstrate our value to customers at those moments of crisis,” said Hearn.

On macroeconomic trends—such as claims inflation, hyperinflation, rising interest rates, and the potential for a global recession—Hearn said that, in reality, it’s unclear how the “confluence of all of those ingredients is going to manifest”.

“It changes rapidly and regularly, and other ingredients seem to arrive,” he added, citing the UK government’s change of leadership.

Hearn recalled a call with the Bank of England a few months ago on the impact of macro trends on the UK, stating that it was “quite alarming”, and that while these macro trends will manifest in the re/insurance industry, it’s uncertain how they will appear and what the next issues may be.

“Our industry can create sustainability, take out volatility, deal with severity and bring solutions. That’s the message we need to get out there. We have an opportunity to make our voice very powerful at this moment for the world,” he said.

Hearn highlighted the lag between primary insurance and reinsurance in various points in the cycle, warning that there is currently a lag between claims inflation relative to premium pricing. The most obvious example of this, said Hearn, is in personal lines. Costs are increasing as the costs of labour at garages and in the supply chain go up.

“Those increases are being felt today, but we’re pricing premium at yesterday’s view of the world and it’s difficult to correct that quickly,” he said, adding that this increase has yet to emerge in the reinsurance world.

Again, Hearn stated that all these challenges culminate in an opportunity for the market, but also for Inver Re.

“It’s change and it’s uncertain and it’s disruptive and therefore people are considering what their alternatives are and where other ideas come from,” he said.

Turning to the 1.1 renewals and the Monte Carlo Rendez-Vous, Hearn said that although it’s difficult to predict, he will be telling customers that this is a year when people “will need to be nailing down as much as they can as quickly as they can, given the amount of uncertainty out there”.

“There’s often a debate at Monte Carlo as to whether the year is going to go early or late, and this feels like a year in which everyone should be lining themselves up early. This isn’t a year to be waiting to see how it plays out, or seeing what’s left at the end of the year to see what you can scrape in.”