The 14th India Rendezvous IR2021 is scheduled from 20 to 22 January 2021 in Mumbai. Please mark your calendars!

Embrace the future

Disruption. Regulation. Climate crisis. Ageing societies. Low interest rates. Talent shortage. The list of challenges facing the insurance and reinsurance industry today is as long as your arm. Smart insurers see these developments as opportunities.

By Paul McNamara

Do we need a new model for insurance and reinsurance as we enter a new decade?

The smart money says that we do. Mr Stephen Catlin, the icon of the industry who is co-founder, chairman and CEO of the new specialty insurer and reinsurer, Convex, recognising the need for a new approach, launched his business with the slogan of ‘Challenging the Status Quo’. But what does that actually mean?

“We are doing something that I don’t think anybody else has done so far,” Mr Catlin told Asia Insurance Review.

“We are outsourcing horizontally all of the process that doesn’t require intellectual input. We have one company based in India with 45,000 employees, of which 11,000 are involved in the insurance industry. They’ve got up-to-date technology for process. Frankly, they can do it better than we could do it ourselves. They can fund it better than we could and it saves us 3% of expenses and that’s about a 5% ROE on its own.”

Improve risk knowledge

SCOR chairman and CEO Denis Kessler also has a very clear vision of the big issues that reinsurers in Asia need to focus on to stay relevant. “We believe that public resources should be devoted to improving the understanding of the risks so as to improve the offering of reinsurance and so improve the resilience of those countries against all the perils that they face,” he said.

“When it’s an emerging country facing big catastrophes, it’s a drama and people can lose everything … Resilience is a key word in today’s world. Resilience is at the heart of insurance and reinsurance to help people overcome all the difficulties and catastrophes they can face. Unless you have resilience you are going to have tension and disorder.”

Keeping the baby and the bathwater

PartnerRe CEO Emmanuel Clarke remains unconvinced that there is any need for seismic change in approach. “We’re not changing our business model,” said Mr Clarke. “We do reinsurance only. It is the thing we do best and we’d like to continue doing it in a focused way. Three or four years ago, we made the decision that we didn’t want to be another hybrid company. Many companies went that way because they were concerned about a shrinking reinsurance market and they wanted to secure access to business by going primary. I think that’s a very challenging strategy to execute well.”

Importance of sustainability

AIA Group chief strategy and corporate development officer Mark Saunders sees that life insurers will have to remain vigilant to remain relevant. “The winners will be those with a purpose-led strategy of delivering sustainable differentiated and distinctive value,” Mr Saunders said.

They will achieve this, “Through addressing social problems such as the potent, yet paradoxical, combination of ageing and ‘affluenza’ — as people are becoming wealthier they are not necessarily becoming healthier, as they typically make poor lifestyle choices which are risk drivers of non-communicable diseases which, according to various research sources, account for more than 60% of deaths worldwide and more than 80% of the global disease burden.”

Both now and in the future, modern insurance businesses will need to continue to change and adapt to their surroundings and market demands. But rather than being seen as a threat, smart insurers will grasp this as an opportunity to help their business, improve the resilience of societies – and provide an attractive working environment for the next generation of professionals.

Top risks in 2020 and the decade ahead

In a report SCOR Re has listed the following existing and emerging risks that are likely to impact the insurance and reinsurance industry worldwide in the new decade.

Significant opportunities exist in the Indian reinsurance market

Lloyd’s chairman Bruce Carnegie-Brown spoke with Asia Insurance Review on its Indian plans, challenges facing the Lloyd’s market and its plans for the future.

By Jimmy John

How important is the Indian market for your overall business plans?

India is very important to Lloyd’s business plans, as it represents such a huge opportunity for growth. The country is now the fastest growing global economy and is forecast to become one the top three economic powers in the world over the next decade, backed by the Indian Government’s target of creating a $5tn economy by 2024. This growth will need insurance and reinsurance to support it. At Lloyd’s we see a significant opportunity in the Indian insurance and reinsurance market. The Indian general insurance industry has demonstrated an impressive growth of 12-15% in gross written premium last year.

We welcome the reforms being undertaken by the government in India and by the Indian regulator. The moves to allow 100% FDI in insurance intermediaries is a very positive step and will increase foreign investment in the insurance sector. We hope that the Government will consider introducing a 100% FDI in insurance companies, too. A host of foreign reinsurers have set up branch operations in India, and we expect many more to come. Lloyd’s will look to introduce specialist (re)insurance products into India, which will complement the local market and also plug some of the product gaps. Lloyd’s is continuing to see an increase in its Indian business and last year, we wrote US$275m of Indian reinsurance business.

Lloyd’s recently launched its blueprint on its strategy and vision and so how is this going to impact business around the world?

This first Future at Lloyd’s blueprint marks an exciting new chapter for Lloyd’s. It sets out how we are going to combine data, technology and new ways of working to ensure we remain globally competitive. We are aiming to build the most advanced insurance marketplace in the world.

This is great news for everyone who works with us including our brokers, capital providers and customers. It will mean we offer even better solutions to the risks faced by our customers; we will deliver better products and services to our customers and capital providers; we will simplify the way we work by being more efficient and reducing costs; and we will build an inclusive, diverse culture the that reflects our global customer base. In combination, this will help Lloyd’s grow and importantly offer more comprehensive, tailored and relevant products to our customers.

Lloyd’s is known for its innovative approach around the world and so what are some of your recent initiatives?

Lloyd’s has launched a series of cutting-edge products recently targeted at the new needs of customers. Examples include a new multi-million-pound space insurance policy for the emerging private spaceflight industry, designed to cater to the distinct needs of a rapidly growing new space sector; and a parametric policy that protects hotels from lost profits, for example, due to unexpected events, which are outside the control of the hotel such as a terrorist attack.

Last year we launched the Lloyd’s Lab, an InsurTech innovator that gives cutting edge start-ups the chance to work with Lloyd’s market experts to create the next big insurance innovation.

We have also created our Product Innovation Facility, which is a safe place for underwriters to trial solutions for non-standard risks that might not fit the traditional market, such as those relating to intangible assets and new technologies. Innovation is very much at the forefront of what we do to ensure we continue to provide our customers with the products they need in a fast-evolving business and risk landscape.

The reinsurance market is facing the heat of increasing protectionism, environmental and political headwinds and so how do you see the future of the industry?

Risk sharing, transferring and trading is a fundamental feature of the global financial system. How such transactions are structured and valued, whether as insurance, reinsurance or as other forms of financial instrument has always been influenced by the geopolitical and economic environment.

The current global political environment has the potential to reduce the financial effectiveness of some cross-border reinsurance and retrocession transactions. This added to an ever-changing view of the physical, financial and legal risks that can be transferred and protected by the (re)insurance industry means that there continues to be an ebb and flow between the (re)insurance and wider financial system in terms of the solutions and products provided, and the evolution of products to meet clients’ needs.

We have seen this in recent years with the ongoing development of indexed and parametric products as alternatives to traditional forms of indemnity insurance (e.g. for natural catastrophe risks), and for expanded forms of coverage for emerging and expanding perils such as cyber. We also continue to see a merging of the traditional (re)insurance industry with the wider financial services sectors and investors (in particular pension and sovereign-wealth funds) in terms of the participants and counterparties involved in risk sharing, transferring and trading. For as long as the insurance industry focuses on providing confidence to our customers that we will be there for them when they need us; reduces the costs of delivering our products; and invests in creating products that are relevant to the risks faced by our clients; the industry has a bright future.

So, whilst the reinsurance sector is clearly going through a period of extensive and rapid change and recalibration, the role of reinsurance looks healthy as long as operating models continue to evolve to embrace technology, enable and promote product innovation to meet customers’ needs, and can rapidly respond to changes in political, legal and regulatory environments.

An evening of fun and camaraderie

The India Rendezvous kicked off yesterday evening with the customary opening cocktails and delegates had a great time catching up with friends, colleagues and acquaintances.

Making time for business

Meet The Team

Editor-in-Chief: Sivam Subramaniam
General Manager Business Development: Sheela Suppiah-Raj
Editorial team: Paul McNamara, Jimmy John, Anoop Khanna
Marketing Associate: Krishna Kumar Design & Layout: Angeline Tsen, Jerick Yu