Keeping up with digitalisation, data and AI

By Amir Sadiq

Throughout the course of the COVID-19 pandemic, data that was collected became more diverse as segments of the population that had not been particularly digital-savvy were forced to use digital tools due to social distancing requirements, said Munich Re chief data officer Fabian Winter during a panel discussion at the 17th Singapore International Reinsurance Conference yesterday.

“Overall, we got more data. We got more diverse data. The major question will be how much of this will remain after COVID and I think that will be a very interesting question,” Dr Winter said.

He said that there will also be question of how fast the insurance industry can adapt to that acceleration, given that it is not at the forefront of digitalisation and AI use, compared to other industries. He believes that the industry’s adoption of such tools is ‘quite heterogenous’.

Dr Winter pointed out that there is quite a degree of variance of digitalisation, data and AI adoption rates among insurance and reinsurance companies and that there might be some that are not convinced of the effects of adopting such tools and that are still reluctant in making the necessary investment.

“For the smaller- and mid-sized ones, I think it is very important to approach or to get started with AI and the data topics in an ecosystem. You don’t need to build up everything [on] your own but you somehow have to find the right partners,” he said, and added that even a larger company like Munich Re does not do everything by itself and works with other organisations on bigger developments such as quantum computing.

Providing a regulator’s perspective, Office of Insurance Commission Thailand organisation strategy and risk management department senior director Prapapas Kulpawaropas said that she has noticed an increase in insurers studying and researching the use of AI in their processes.

She said that this has been seen in a wide range of processes from simple, repeatable ones to more complex tasks such as underwriting and claims.

And while being able to utilise data is important, she emphasised that it is just as crucial to pay attention to data sensitivity. As insurers use more data in the future, they need to make sure they handle data properly and in compliance with data protection laws in each jurisdiction.

Pandemic is an opportunity to evolve

By Anoop Khanna

A panel discussion on the insurability of pandemic business interruption risk at the SIRC yesterday focused on the dilemma that insurers face: How to face society in a crisis.

The panellists felt that the industry needed to come together and create awareness amongst consumers and governments. Consumers need to understand what they can expect from the insurers, especially during extreme events.

While the industry is willing to support businesses, solutions are not easy to find, and insurers are also answerable to their shareholders.

Moderator of the panel, Geneva Association deputy managing director Kai-Uwe Schanz said the public health measures taken to contain the spread of COVID-19 to protect the vulnerable have been hard for businesses. Many had to curtail their operations severely or close.

Chubb Group senior vice president and Chubb Asia Pacific regional president Paul McNamee said that the insurance industry has the experience, the assets and the collective learning and experience in managing risks.

He said there has to be cooperation between government and industry not only for insurance but across the board. It could be in the form of risk pooling, risk sharing and much more.

Peak Re CEO Franz Josef Hahn was appreciative of the way the industry handled the pandemic and said insurers did a good job and honoured their commitments and paid claims. They were resilient, he said, and that was the most important part.

He said we need to invest more in understanding and analysing risks and the industry should do a better job in communicating and creating the awareness of risks.

Global Asia Insurance Partnership CEO Conor Donaldson said public-private partnerships and mandatory insurance would be the best move for the industry. Developing our risk intelligence in dealing with such events is important, he said, and it represents an opportunity for greater resilience.

Guy Carpenter regional CEO Asia Pacific Tony Gallagher said the pandemic is an event that is not bound by geography or time but that we have a limited amount of capital that is willing to take risks such as this relative to the scale of the economic losses.

He favoured collaboration between government and industry, especially in the area of systemic risks. He said working with government with the learnings and understandings of the industry about risk could create workable solutions.

Improving sustainability as a community

By Ahmad Zaki

The (re)insurance industry has a combined asset base of an estimated $35tn, which means that the industry, acting collectively, has tremendous buying power and influence when it comes to supporting ESG investments and the move towards a low carbon economy, said AM Best managing director, analytics Greg Carter, at the ‘Sustainable ESG – Boosting our social impact’ panel yesterday.

“Collectively, the industry can bring a lot of pressure to bear, but it can also bring a lot of that important funding that’s needed,” he said.

The finance industry has also become the arbiter of the right thing to do, said DBS Bank head of sustainability, institutional banking group Yulanda Chung, following on Mr Carter’s point. “It used to be that we were able just to sit back and follow what the government said was legitimate. But now we are pressured by our stakeholders to pass value judgements – and I think it is a very hard question to answer and it takes all parts of the financial community to come to a consensus.”

The entire finance community has also been collaborating and marching in the same direction in recent years, something which took several years to accomplish. “Even for thermal coal, it took decades for everyone to agree – and even then, at COP26, we said that there was no phasing out of thermal coal, just phasing down,” she said.

“There has been a lot of momentum on this topic. There is enough media coverage that we are on a good path, and I feel quite positive,” said Swiss Re Asia CEO and Asia president Russell Higginbotham. “There are regulatory stress tests, plenty of financing and support that are all pushing us in the right direction.”

He added that it was not a single company or sector topic, but one where collective action is needed. “It’s not a topic for competing against each other, but for standing together, and getting the problem solved,” he said.

Leaders must encourage digital culture

By Jimmy John

Senior leadership, including the board, must work collectively to create a digital culture within insurance companies to drive transformation.

Speaking at the SIRC panel discussion on how technology is changing the industry, Bolttech Group chief technology officer David Lynch said that technology was having an enormous impact on the consumer. He spoke of the need for a clear alignment between the board and senior leadership for successful digital transformation of the organisation.

“Companies need to take an end-to-end view of digital transformation and cultural transformation must also happen along the way,” he said.

Building partnerships is critical

Swiss Re chief digital transformation officer Pravina Ladva said that technology was a co-enabler and accelerator in addressing consumer needs.

“Technology helps us to take out the inefficiencies from our programmes and become faster and efficient,” she said. She said that one of the core ingredients of digital transformation was selecting the right partner.

“We need to create partnerships that we can align with. Swiss Re looks at external partnerships to see how it can bring new solutions and services for our clients,” she said.

Ancileo founder and CEO Olivier Michel said that working with external enablers can accelerate the digital transformation process. “When working with external enablers, do not outsource your thinking process but let them adapt to your culture and DNA,” he said.

Lesson from banks

Ms Ladva talked about how the banking industry, with a hunger for change, pursued digital transformation with pace and focus. On the other hand, Mr Lynch said that most banks have a rich transactional database which insurers lack - and so they need to offer value-added services through the use of technology.

New technology in the offing

Mr Lynch said that insurers must increasingly tap into the power of APIs to drive digital innovation and experiences. “Ecosystems will continue to be built and thrive, but we need to get the hyper connectivity right,” he said.

He feels that the rise of NFTs and digital assets other than digital wallets will have a huge role in the future. On the other hand, he said, decentralised insurance is on the rise with more insurers and consumers participating.

Ms Ladva said that in future there would be greater unleashing of the power of technology and the outcomes would become more visible.

Cyber protection and global insurance programmes

AXA XL’s Ms Shiwei Jin says multinational companies can use global insurance programmes to protect their assets in different geographies from risks like cyber that respect no boundaries and are almost always one step ahead of all security strategies.

By Anoop Khanna

Cyber attackers have exploited the pandemic to the hilt. Even as the pandemic ebbs, cyber criminal activities show no sign of abating and it doesn’t even look likely. While the hackers don’t distinguish big or small, their targets are usually large corporate entities operating in different geographies.

Pandemic has changed cyber risk dynamics

Speaking with Asia Insurance Review AXA XL global programmes and captives regional director for APAC Shiwei Jin said, “According to our latest AXA Future Risks Report 2021, the massive use of digital solutions during lockdowns resulted in an explosion in the number of cyber attacks, with serious consequences for companies and administrations. For the first time, cyber risk has taken the top spot in the US and the second place in all other geographies including Asia.”

Ms Jin said, “Threat landscape and priorities have changed due to the massive shift to remote work and digitalisation. Today’s cyber criminals are highly sophisticated, agile and well-financed, it is critical for organisations to assess, prevent and transfer their cyber risks effectively.”

A report by Accenture in early 2020 said the rush to remote working meant more employees using their own devices - printers, monitors and USB devices - to supplement those provided by employers.

More unprotected desktop protocol connections lacking multi-factor authentication meant more stress on people working remotely as they cope with new systems and protocols.

Global insurance programmes can bridge the gaps

As more and more manufacturers rely on internet of things devices to monitor/control their operations, the incidence of cyber attacks in the manufacturing sector is growing rapidly.

Cyber criminals are becoming more experienced in exploiting vulnerabilities in automated systems and IoT devices, which are often installed with little or no built-in security.

Ms Jin said, “Today multinational companies usually prefer to insure their multi-country risks through a global insurance programme. It provides an advantage of having broad, consistent coverage with no gaps or overlaps. This becomes all the more important in the current scenario where borderless threats like cyber attacks are surging rapidly.

“There are several reasons that underscore why it makes sense to manage and mitigate cyber risk in a global programme. Global insurance programmes have helped companies protect their employees and either sustain or grow their businesses during the pandemic.”

“First and foremost, cyber attacks are borderless. When a company seeks to have separate policies for its geographies, the capacity in the market could be reduced potentially given that cyber can affect all of its geographies at the same time and insurers would need to look into their risk aggregation. To have a global programme where limits and conditions are shared under the master, clients would have the opportunity for better pricing and wording,” said Ms Jin.

Expertise and resources available

A global insurance programme also makes available an insurer’s best expertise and resources for the overall benefit of the global insurance programme client.

Ms Jin said, “Unlike general property and casualty coverages, standard cyber policy wordings are not widely available in many places. In sum, a global insurance programme for cyber offers clients greater transparency, certainty and consistency. With this relatively new, complex and continuously evolving threat, local capabilities for assessing, underwriting and preventing it vary considerably.”

“Clients insuring cyber in a global programme will typically work with highly skilled underwriters who understand cyber risk in different parts of the world. We offer our clients access to expert vendor partners who provide proactive cyber risk mitigation services at negotiated preferred rate.”

Ms Jin said, “Also, in the event of a cyber incident, the insurer’s designated response team can provide specialised resources instantly in country or from all over the world in a compliant manner.”

Dealing with market changes

As countries loosen COVID restrictions and business resumes, it’s up to the reinsurance and insurance sector to facilitate economic activity, says International General Insurance’s Mr Nick Garrity.

By Ahmad Zaki

Many organisations, large or small, operating during this pandemic period are facing financial distress, which requires insurers to be more careful around risk quality, said International General Insurance (IGI) CEO, Labuan branch Nick Garrity. The company ensures that in the risks it selects, corners are not being cut, that risk management standards are being maintained and that companies invest in preventive maintenance.

“Some of the challenges created by the pandemic relate to supply chain difficulties, so getting things from A to B is more of a challenge for our clients. Where we see that really coming home to roost is in large engineering and infrastructure projects where the pricing and availability of materials are both difficult, resulting in delays and increased costs,” he said.

In Asia, where infrastructure construction is still an important contributor to economic growth, there are many engineering construction projects being extended beyond their original planned completion dates. This offers the insurance and reinsurance sector opportunities because existing markets will get additional income from projects that are going on to extension.

“That’s on the first party side – for property risks, engineering risks, oil and gas power. On the long tail or casualty side, where there are companies which are experiencing economic difficulties, we must be prudent around our underwriting of, say, D&O liability business, because companies that are not being well managed or are in financial distress as a result of the pandemic may fail or face shareholder action,” he said.

Asia’s hardening market will slow down

The carrier expects to see a slowing down of hardening in several short-tail classes of business, particularly oil and gas power, where capacity seems to be returning.

“We will also continue to see rate rises in the more technically-challenging classes of business to underwrite that are normally excluded from the treaties. They require a high level of expertise in underwriting, and include classes such as engineering and operational power, financial institutions, and certain professions within the professional indemnity market,” said Mr Garrity.

“It will be difficult to make a broadbrush prediction of the reinsurance market’s performance in 2021 due to its diversity and complexity within the Asian market. Everybody has the opportunity for profitable growth, but it will boil down to knowing what you’re good at and how to make money that will be key to success. There isn’t a rising tide that will raise all the boats.”

Addressing premiums and cover

He noted that IGI’s clients are most concerned about how they manage premium increases and cover restrictions for themselves or for their own clients. “Our approach is to have a dialogue with them to understand the constraints they face in their businesses, and work with them to give them solutions, tailoring coverage so they can get the protection they need for their clients without incurring damaging price increases or unnecessarily exposing their businesses.”

This is most easily done through tailoring deductibles or taking out unnecessary areas of cover, but IGI thinks that it is best done through dialogue. Where clients sometimes can go awry is where they respond to hardening market conditions by pursuing formulaic tender processes involving multiple brokers, rather than engaging with their existing insurance partners to explain their needs and try and reach a collaborative solution. A scattergun approach in classes where capacity is constrained can often produce counterproductive results.