By utilising the abundance of reinsurance capital alongside advanced technological and analytic capabilities, the sector has an opportunity to create a supply/demand equilibrium, according to several industry experts.
Insurance, reinsurance and risk transfer leaders and executives met in New York recently for the 2015 Global Insurance Forum, which saw a panel during the second day discuss the potential for innovation in today’s market and how technology can help to increase the supply of re/insurance products globally.
There’s “an opportunity for us to achieve greater equilibrium in the supply/demand balance, I think the challenge we have right now is the lack of increased demand, clearly it’s not a dearth of capital supply,” said Kean Driscoll, Chief Executive Officer (CEO) of Validus Re.
With the supply of re/insurance capital from alternative and traditional sources continuing to expand and stress the market, the desired step would be to find ways to efficiently deploy it so that people most in need of protection have access to it, something which, highlighted by the increasingly broadening insured to economic loss protection gap, is easier said than done.
However, advanced catastrophe modelling platforms, improved technological and analytic capabilities that exist in the world today, has created a situation where it’s now possible to show people, economies, even whole countries just how beneficial re/insurance protection can be.
“10 years ago or 15 years ago having reinsurance brokers or reinsurers thinking about how can I create more demand for my product, how can I get more people or things that are not insured into the insurance sector, wouldn’t have happened,” explained Britt Newhouse, Chairman of Guy Carpenter.
“But because of technology and being able to analyse it you have more people thinking about how to persuade x, y, z country that the last flood that happened to their neighbour was dealt with quickly, efficiently, the economy got back online quickly, and when they have a flood it doesn’t happen,” continued Newhouse.
It’s an interesting and valid point; historical data sets and scenarios of many property re/insurance exposures can now be customised, updated and tailored to fit the needs of countries and societies across the globe.
Increased efforts by numerous catastrophe modelling firms has seen a rise and advancement in the development and depth of modelling platforms for many of the world’s perils, from earthquakes to storm surge.
Chief Executive Officer (CEO) at XL Catlin, Mike McGavick noted; “There really are vast populations of underserved individuals, and with new technologies it is really possible, as it has been demonstrated in the banking system, to create micro-policies that do very specific things for currently underserved populations.”
“And this is really exciting, because it’s one of the places that we can bring our energy and our understanding to make a real difference,” McGavick continued.
He continues to explain that when there’s a catastrophe event that causes significant economic losses compared to insured losses, it’s an opportunity missed by the industry by not being present there and helping to build resilience.
Interestingly, notes McGavick, when hurricane Sandy arrived in the U.S., striking one of the most insured areas on earth, only 50% of the risk was insured, “we have so much more to do.”
The opportunities to increase education, innovation and access to re/insurance products and solutions through technology and desire is clear to see, and with the glut of re/insurance capital in the market waiting to be deployed into emerging, developing markets it’s up to industry participants to make efficient, achievable products available for the underserved, vulnerable people of the world.