ROUNDTABLE: REINSURANCE
Q4: WHAT INNOVATIONS OR NEW DEVELOPMENTS ARE YOU SEEING?
“Younger folks demand a lot more flexibility around how, where, and why they work.”
Paul Simons
Simons: Climate change and ESG are both things we’re spending a lot of time on top of the house. We are considering the best way to deploy capital when it comes to green investments. We’re also focusing on AXA’s long-term exit strategy of reducing exposure to the thermal coal industry to zero by 2030 in the EU and Organisation for Economic Co-operation and Development countries, and by 2040 in the rest of the world.
Another development that is worth noting is the need to attract and retain young talent as a large number of very experienced individuals are retiring from the industry. This creates opportunities for some talented young people.
However, they look at life differently, and the industry needs to adapt with them. For example, the industry needs to embrace technology better. I know it’s happening, but it always seems to be at a snail’s pace. >>>
“We’ve developed tangible ESG analytics.”
Adam Champion
<<< Also, younger folks demand a lot more flexibility around how, where, and why they work.
It’s not just about a paycheck. Our industry needs to innovate around talent.
Champion: Given that my background is in catastrophe modelling I have a real commitment to bringing data and technical expertise in-house rather than just licensing tools to help understand risk.
Further, it’s clear that capital and balance sheet decisions are truly being dictated by a carrier’s ability to address ESG. Carriers that want to attract third party capital going forward will have to deal with that. Money is already flowing in that direction.
It’s more than lip service and those that get on board will win, those that don’t will fall short. From our perspective, we’ve developed tangible ESG analytics and we are building a product to help the market address it.
“ We continue to see asset-intensive life companies coming to Bermuda.”
Anup Seth
Seth: I agree with the comments around the legacy markets. If we can crack this, in addition to some of the trapped collateral solutions that we desperately need, Bermuda will benefit.
The legacy market has traditionally focused on the casualty side, the long tail. Yet we’re now discussing legacy cat portfolios. That’s interesting, almost like a non-Lloyd’s reinsurance to close (RITC) partnership that they could set up with an ILS fund or other markets here in Bermuda. Watch this space.
We also should not forget the innovation on the life side. We continue to see asset-intensive life companies coming to Bermuda for all the reasons we mentioned earlier. And we are also seeing some long-tail sidecars coming to Bermuda, casualty sidecars. That’s an exciting development on the Island as well.
It shows how the ILS industry is innovating and diversifying. These are some of the examples of innovation that we’re seeing. Looking into the future, I hope that Bermuda can continue to be the innovative centre and the world’s risk capital.
We can continue to bring risk and capital together efficiently. And there’s every reason to believe we’ve got the proper regulatory framework. If we maintain the right talent pool, there’s no reason why we wouldn’t thrive.
“The BMA is a trustworthy partner for the industry.”
Christian Dunleavy
Dunleavy: I’d endorse a lot of the sentiment on the legacy as well as ILS expanding outside of cat. That’s very quietly been happening in the background as a natural evolution of ILS, but also probably somewhat of necessity because they were kind of undiversified in cat.
Other than that, there are some opportunities to think about some long-term public-private partnerships around some of these difficult risks.
We want as much of it in the private space as possible, but some risks, such as pandemics, are too complicated for the private sector to take on alone.
And there are opportunities in things such as cyber where public-private solutions could enhance the product offering. And maybe this is a little counter to innovation, but having a user-friendly, sensible, but robust regulatory environment is an innovation in a way.
I find regulators in other countries are navel-gazing around some of these topics and are holding back innovation. In contrast, I think the BMA is a trustworthy partner for the industry and the Island in that. It continues to set the Island apart.
“It’s not just the new run-off companies that will be innovative.”
John Huff
Huff: The most fertile ground for innovation is the move from peril to protection. Real innovation will come when we start thinking holistically about how we add protection and not merely indemnification.
There are some great examples in the cyber market. People are not buying cyber coverage. They’re buying cyber protection. They’re buying a whole suite of products around how to deal with the breach and how to improve your hardware, and software within your systems.
That’s where the innovation will come from.
We’ve talked about run-off already and the variety of innovations that may be available there to transfer portfolios. >>>
<<< It’s not just the new run-off companies that will be innovative. The legacy firms will want to peel off some business books to deploy capital to take advantage of new opportunities.
Finally, there will be real opportunities around climate change. Our business is the climate. The real innovation is that once companies and even individuals are aware of their climate risk, they will want to transfer that risk. And that’s where the innovation will come from.
De-risking climate risk creates real opportunities for our market.
Image courtesy of Shutterstock / oneinchpunch
