Looking ahead and around with Swiss Re

In his fireside chat Moses Ojeisekhoba spoke about how the industry had been a shock absorber in these uncertain times and how it was positioned to help solve systemic problems while enabling sustainable progress in the future.

Change, said Ojeisekhoba, had been the main theme of 2021.

“It’s in environments when you have uncertainty that Swiss Re is at its best. We employ people whose prime role is to figure things out and to make sure that we have the right models in place,” he said.

“It’s looking not just at the patterns of the past, but also at those of the current situation, and thinking about what it means and what the right price is for the risk in working with clients.”

A big part of this, he said, was around the subject of climate change. The story in previous years was that the losses driven from that had been “primary” but that those losses are increasingly “secondary”.

“If you look at 2019, 2020, and 2021 we’ve seen a revolution in the losses incurred through natural hazards. A lot of them are now coming from secondary perils such as winter freezes, floods, and wildfires. The proportion has gone from around 25 percent two decades ago to over 50 percent today. We need a significant understanding of these perils and we need to have the right risk protection measures in place,” he explained.

Ojeisekhoba, who is based in Switzerland, said the insurance industry is not immune from criticism over its practices when it comes to its carbon footprint. Before the COVID-19 pandemic, he explained, he had usually spent half of each month travelling, often to Singapore and back in order to attend meetings.

That has now changed. “I certainly won’t travel as much as I did before,” he said, when asked whether he would do so after the pandemic subsides. “As much as I loved it, one thing that became clear during lockdown was that people are far more open to communicating in different ways. That’s important when it comes to building relationships.

“There’s a place for face-to-face meetings but we don’t need to travel nearly as much.”

Ojeisekhoba linked in environmental, society, and corporate governance (ESG) factors. “There’s a carbon footprint in that travel is not good for the environment. We can tell our clients about changes they can make to reduce their environmental impact. But we also need to change.”

The role of insurance

Ojeisekhoba made it clear that the insurance industry has a role to play in promoting environmental sustainability.

“We wield significant power when it comes to ESG. Climate change correlates with the ‘E’ in that acronym. There’s also the ‘S’ and the ‘G’ components,” he said.

“If you look at the balance sheets, the insurance companies are significant holders of assets. With that, you can influence what companies do by deciding where you direct your investments. If you direct them away from industries that make negative contributions from an ESG standpoint, you help to evolve and make the change that needs to take place. And on the liability side, you can be firm with certain activities that are not good for the environment.”

Away from climate change and ESG concerns, Ojeisekhoba also spoke about digitisation and the challenge of data within the industry. While people might think all data is valuable, Ojeisekhoba explained that this is not the case and why, he said, Swiss Re hires experienced and capable people to work in this area.

“From a consumer standpoint, I can see why they think the insurance industry is behind the times in this, but that’s a bit unfair because a lot of companies have employed technology extensively in how they collate, rate, and process data. We’ve seen technology and data being deployed increasingly.

“One of the fortunate consequences of the pandemic has been that digitisation has been accelerated because people were forced to work in a digital environment.”

Looking ahead, Ojeisekhoba said that much of the changes in 2021 will carry over in the next year. He explained that the key is in how to get a better understanding of the profile of risk so that it can be priced correctly. One thing he mentioned was inflation, which is touching 4 percent in many European countries. Ojeisekhoba said this was one aspect that Swiss Re was looking at.

“We need to understand all this better,” he explained. “On the cat side, we think of social inflation as being germane only to the US, but it also pops up in other parts of the world.”

However, he said, the industry remained robust. “We put out a publication that looks ahead to 2040 and makes estimates about the premiums generated by the industry. In fact, we expect them to double, with the largest contribution to that coming from Asia.

“Climate change is not the only reason that risk is changing. Human behaviour is also a factor. As people earn more, they accumulate more assets. There’s also the fact that people like to live in places that are dangerous—we build homes on the seafront, or close to a forest.

“Risks are increasing, and that means you need capital and capacity to help build protection for consumers. I see a lot of that in the next two decades,” he concluded.