Remain relevant: insurers must embrace future risks

In attendance:

Jayanta Guin, executive vice president and chief research officer, Verisk Extreme Event Solutions

Tom Orton, property reinsurance underwriter, Ariel Re

Shaun Sinniah, chief operating officer, distribution, international and global specialties, Guy Carpenter

Johan Slabbert, chief executive officer, MS Amlin Underwriting

Daniel Stander, senior adviser, United Nations Development Programme

Catherine Thomas, senior director, analytics, AM Best

John Warwick, chief executive officer, Excess Weather

As attendees at the Monte Carlo Rendez-Vous debate hard market conditions and capacity shortages amid some of the most challenging negotiations for decades, this roundtable, hosted by Intelligent Insurer, instead focused on the future and the industry’s ability to adapt and innovate.

A panel of executives from carriers to brokers to rating agencies debated how the industry can best manage the future of risk and risk transfer, and Daniel Stander, a representative from the UN Development Programme, offered a perspective on how success in this regard could offer positives to society.

Jayanta Guin of Verisk Extreme Event Solutions set the scene by explaining that Verisk was focused on three broad macro themes: climate change, digitisation and interconnectedness. Many might refer to the latter as globalisation, he said, but he would argue the world was potentially reacting from that while remaining connected.

Guin said all three offer many opportunities for the industry to offer solutions. “From green buildings to protecting digital assets to solving the issue of bad data, there are so many opportunities,” he said.

Stander agreed that this interconnectedness was challenging, since it made the macroeconomic environment that much more complex. “But the role of insurers can be to bring to bear solutions that alleviate the challenges faced at a human and economic level,” he said.

He said this was the first time, to his knowledge, that the UN had attended the Rendez-Vous. He felt it was important because the risk transfer industry has such an important role to plan in sustaining development goals in the long term.

“My role is to educate and enable the value chain,” he said. “We understand that we need a partnership with the industry.”

He said that partnerships such as this have the potential to increase insurance penetration, often to the people and societies that need it most.

Parametrics

John Warwick of Excess Weather, a broker of parametric products and solutions, explained some of the breakthroughs that are taking place in the parametric world, driven by new technology and the subsequent availability of data. He said the business is working on products for many different parts of the world.

“There is a growing demand for these products and the use of technology such as satellites is making things possible,” he said.

Shaun Sinniah of Guy Carpenter noted that as re/insurers’ investments in technology continue to increase, he expects many exciting developments to emerge as a result.

He noted two specifically: the efficiency of embedded insurance coming to the fore; and the internet of things facilitating better risk management.

AM Best’s Catherine Thomas said the industry must embrace innovation simply to remain relevant. She noted that the protection requirements of clients have changed dramatically, and the industry must accept and adapt to these needs.

“The risk landscape is more complex than ever and it is so interconnected,” she said. “Intangible assets, for example, represent a growing part of the risk landscape. The challenge is to understand those risks.”

Johan Slabbert of MS Amlin Underwriting said that this topic was front and centre of the company’s strategic planning. In a recent board meeting, 25 percent of the time had been devoted to considering the future of the risk landscape, to ensure the business would remain relevant in the long term.

He added that one of the challenges for the industry when considering this was the role of government. As government actions during the COVID-19 pandemic proved, this is a true systemic risk, he noted. “One of the greatest systemic risks could be risks driven by government policy,” he said.

A role to play

Thomas noted that the industry can play important roles without necessarily having to take risk. “It can display its technology and knowledge to devise solutions without having to take risk directly,” she said. “It can also play an important role in risk mitigation, such as in cyber, for example.”

Stander picked up on this. “I agree that the industry is about so much more than paying claims. Its knowledge and awareness of risk can play and important role in many other ways. It does not have to always end in risk transfer.”

Tom Orton of Ariel Re said that one of the biggest challenges for a cat underwriter when considering writing risks in developing nations was poor data flow.

“As a property monoline, we have to be very discerning in the risks we take. We cherry pick maybe only 10 percent of what we see.”

Picking up on this Slabbert added that the role of the underwriter in the future would also change—but perhaps not as much as some might think. While more data and science would increasingly inform risk selection, he said the human touch would remain essential.

“Underwriting is part art, part science,” he said. “The art side will still be needed. The science will be key but a decision based on that will still be needed.”

Sinniah concurred. “And that is where the role of the broker comes in—the art of interpreting the science.”

Summing up, Stander said he was optimistic about the industry’s ability to evolve and innovate. “It needs purpose and profit, but the purpose needs to come first,” he said.