Looking at insurance from the other side of the world

It would be easy to be cynical or, at least, downbeat about the current state of the world. Freak weather events, once rare, now seem increasingly common and worsening. The world’s economy, still weak, is looking to go through a period of high inflation. And like the shark that goes out to sea before coming back to attack those unwise enough to re-enter the water, the COVID-19 pandemic has seemingly and temporarily receded.

Yet, some remain positive. One of these is Franz Josef Hahn, chief executive officer of Peak Re, who came to Intelligent Insurer’s 1.1 Club, the online and on-demand platform for one-on-one interviews with industry leaders.

“We have a positive outlook on the rest of the year, although I can’t go into full details right now because I’m not authorised,” Hahn said.

“We’ve been maintaining our client services and our contact with clients. Some of us have been travelling actively in China, while the rest of us have been managing through video calls.

“In total, it’s been quite a good year so far. The winds are still blowing, the rain is still falling, and the earth in places is still shaking but, with a little caution, we are moving in the right direction.”

When Intelligent Insurer spoke with Hahn, he was at his desk in the company’s office in Hong Kong. After the tumult of the COVID-19 pandemic, which seems to have originated in the Chinese city of Wuhan, the country is beginning its financial recovery. It is this area of the world that Hahn sees as the powerhouse in the world’s economy.

The recovery, he said, will be driven by trade. “This is a challenge at the moment because of the issues in the supply chain. But we are positive about the recovery in China and in South East Asia, and it’s likely that strong growth is returning, even if not at the levels we saw before the pandemic,” Hahn explained.

Chinese property developer Evergrande was still teetering when Hahn spoke to the 1.1 Club in early November, with many fearing that a collapse would spread through the economy like a contagion.

“It’s a huge challenge, and it’s one of the headwinds next to the economic issues, with the risk of default increasing significantly. That’s certainly something we’re watching,” he said.

Cultural differences

One of the challenges in this part of the world is the cultural differences around financial services, some of which underpin protection gaps in Asian countries. Hahn singled out the Philippines.

Referring to Typhoon Haiyan, which struck the Filipino city of Tacloban in 2013, Hahn said that only 5 to 10 percent of the local population had insurance. “That’s a good example for the low penetration rate in P&C,” he said.

Hahn reeled off some statistics. “On the non-life side the penetration gap is 0.5 percent; it’s 1.2 percent on the life side. And these are in savings plans.

“The population knows about the life agencies and, unfortunately, we have seen over the last two decades in the Philippines that a number of savings plans have failed. The companies have suddenly closed and vanished. That definitely doesn’t instil trust in the people. Certainly, the insurance and reinsurance industries can do more,” he explained.

The industry is fighting a battle to prove its mettle in this region. “People often trust family or friends more,” he said. “If they can’t trust them or they don’t have the funds, they often go to the loan shark around the corner.

“They do that because they know this person and they don’t know the insurance people. They don’t know whether they can trust us, and that’s something that needs to be overcome.”

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Climate concerns

Hahn reflected on the importance of climate change within Peak Re’s planning. “There’s a strong impact on social life, especially in areas of the world where communities are not adequately insured.

“Even though some countries have been growing in wealth quite rapidly over the last three decades, this is a huge concern. And because many of the people have just entered the middle class, they’re very close to falling back into poverty—also a real concern.”

In the northern summer there was heavy flooding in the North-Rhine Westphalia area of Germany, and the town in which Hahn was born was particularly badly affected.

“The floods there were higher than ever before. Not twice as high, but six times higher. Buildings which had been standing there since medieval times had survived other natural catastrophes.

“When we see entire villages being destroyed, we can allow ourselves to think that there is some mechanism behind that,” Hann said.

He was loath to make further predictions. “My middle name is not Nostradamus but I would like to see an adequate increase in pricing levels,” he said.

“I’d like to see the world community get together to solve the COVID-19 pandemic. And I’d like to see some further, healthy growth for Peak Re.”

“Specifically, that means growth for our people in terms of knowledge across different areas and development. And an upgrade to our IT systems so that we can stay ahead when it comes to efficiency and agility of our booking systems.

“It’s a long wish list,” he smiled.

To view the full 1.1 Club interview click here