The speed and magnitude of change that is coming over the next five to ten years will completely revolutionise the commercial insurance and reinsurance space, according to partners at PwC.
The insurance and reinsurance industry has already witnessed significant change in the last two decades, not least thanks to the entry, growth and innovation related to the capital markets and the development of insurance-linked securities (ILS).
In particular this has already affected the commercial insurance and reinsurance or retrocession markets the most, with effects now also being felt more broadly across P&C insurance as well.
With technology now promising even more meaningful change, to the way insurance business is conducted and risk transfer in general is effected, PwC looked ahead at its annual PwC Insurance Summit conference in Bermuda yesterday.
Arthur Wightman, PwC Bermuda, commented, “Over that last decade we have witnessed significant transformative change within the industry and at PwC we believe that both the speed and magnitude of change to come will revolutionise how the business of commercial insurance and reinsurance is conducted.
“Thematically, when PwC conducted our last Global CEO Survey, we coined the phrase the ‘anxious optimist’ and in speaking with CEOs it is clear that there are a lot of disruptive forces that preoccupy their attention. That said, in equal measure confidence does abound that opportunities are out there and that they are meaningful. Some 90% of CEOs are confident about their revenue prospects over the next three years. And so we look forward to gathering perspectives on strategies for success in this ever changing and new environment, particularly, when it comes to thoughts around mainstreaming innovation and deploying technology.”
The rate of change has certainly been accelerating and innovation in the ILS market has ramped up in response to this. Additionally we’re now seeing the capital markets looking to technology distribution and transactional channels as new ways to originate risk, which only promises to enhance the efficiency of third-party capital.
The mainstreaming of innovation, as Wightman puts it, is set to be a key driver for future growth as well as accelerated change in the industry as a whole.
At the moment, innovation can often appear bolted-on to a re/insurer, rather than embedded as a core element of business as usual.
As it transitions from being a shiny accoutrement to being part of re/insurer and ILS company DNA, innovation and technology promise to perhaps leave parts of the industry unrecognisable, compared to what went before.
Matthew Britten, PwC Insurance partner, discussed the “critical role” that mergers and acquisitions are playing in the market and how these transactions will help to reshape the industry and prepare companies for the future.
“This importance stretches far further than simply achieving the goal of top line growth,” Britten explained. “M&A is seen as critical for a number of reasons including achieving an optimal capital structure, realizing the benefits of a diversified product portfolio to meet customer needs and to take advantage of the capital benefits, and also to provide the infrastructure to successfully compete on the global stage and meet the growing regulatory requirements.”
Commenting also on the role of digital innovation and insurtech in the coming revolution in re/insurance, Wightman explained that Bermuda itself is charting its own course to position itself as a key hub for insurtech innovation.
“As insurers look at how to accelerate technological innovation it will be important to consider where they need to partner or build capability and importantly which jurisdictions are being proactive in supporting them in their endeavours,” Wightman said.
Earlier at the event the Premier of Bermuda David Burt said that he has ambitions for the island to be “the world’s insurtech capital” within five years.
Ambitious indeed, but when you consider the innovation in reinsurance capital and business models that Bermuda has helped to drive over the last decade or two, the next decade is almost certain to see the country helping to drive and generate further industry change.
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