Reinsurers watch and wait to see if the FAANG technology giants, such as Google and Apple, move into their territory

Google, Facebook and Amazon could become significant players in the re/insurance business of the future, according to Johannes Martin Hartmann, chairman of the board at VIG Re.

He said the Silicon Valley giants such as Facebook, Amazon, Apple, Netflix and Google the FAANGs will not become insurance companies themselves, but they could still become very influential in the business by coming in to take certain parts of the value chain.

If they get involved in the re/insurance market they will likely focus exclusively on the B2C side, and leave the B2B side of the business alone, Hartmann predicted.

He expects technology giants to partner with reinsurers, rather than competing with them head on, in order to avoid the regulatory burden that reinsurance providers take on.

“But that will still allow them to control a chunk of the business,” he said.
However, he added, smaller insurtechs would find it harder to establish themselves in the industry.

“There are a lot of clever ideas we can use,” he said. “The best ones will be acquired by re/insurers.”

Some of these clever ideas are already having an impact on the business, as re/insurers acquire fintechs, use their ideas as inspiration for their own product development, or forge partnerships.

The impact is particularly significant in personal lines, said Andy Hottinger, president of EMEA and LatAm at AXIS Re. Re/insurers are having to invest heavily to stay competitive in this business, he said.

“Where technology allows re/insurers to process large amounts of data it can improve our ability to predict behaviour, and the better we are at this the more stable our results will be,” said Hottinger.

“Ultimately it could allow re/insurers to sort insureds according to their risk, and create more stable and more volatile portfolios, with different pricing for each. But there is no sign of that happening yet.”

More broadly, Graham Coutts, EMEA head of reinsurance at Fitch Ratings, warned there is considerable uncertainty about whether the efficiencies and cost-savings promised by insurtech can actually be achieved.

For this reason, companies are proceeding cautiously, he said.