COVID-19 survey

Bermuda will endure

During lockdown Bermuda:Re+ILS conducted a survey of its readers to find out what impact COVID-19 has had on the re/insurance industry, and their expectations about business going forward.

“Around a fifth of respondents were confident that COVID-19 will have no impact on Bermuda’s role in re/insurance.”

Bermuda, and its re/insurance community, has now had the best part of six months to adjust to life under the shadow of COVID-19—with much of that time having been spent under a Shelter in Place order where people were asked to stay at home as much as possible.

Bermuda:Re+ILS asked its readers to share their thoughts about how the Island has coped with this lockdown, and what impact it has had on re/insurers.

Figure 1: What have been the biggest challenges for re/insurers in adapting to the Shelter In Place order, working from home and social distancing generally?*

*Respondents could choose more than one option

While a plethora of videoconferencing platforms have given workers plenty of choices when holding virtual meetings, they have not been able to fully replace what can be achieved face to face (Figure 1).

Over half of respondents identified problems communicating with clients, and the inability to conduct site visits, as a problem during the Shelter in Place rules, making it by far the biggest issue highlighted in the survey.

One respondent suggested it was a bigger problem for external meetings than internal ones. “It wasn’t harder to communicate but many external contacts were extremely slow in their response times, whereas internally, turnaround time was extremely fast,” the respondent said.

The Shelter in Place order did not create any significant interruptions in terms of re/insurers’ ability to keep serving their clients, and there is no doubt that contingency planning paid off, as people were able to keep working from home almost seamlessly.

However, keeping the show on the road was more challenging than it appeared, with IT departments working hard to overcome the challenges that arose, making the undertaking look easier than it was. Thirty-seven percent of respondents said there had been technical and IT challenges due to social distancing measures.

A little under a third of respondents said being scattered across the Island, working from home, made it harder to make decisions, while a little over a third admitted they were missing out by not being able to attend conferences or make international business trips.

Only 5 percent of respondents identified difficulties keeping employees motivated: an impressive achievement, after more than three months of working remotely.

It would be interesting to see how much that figure changed if Shelter in Place had to be extended for another three months or even longer. It may be that after a more extended period, challenges around IT and communications would be resolved, while challenges around motivation and morale would grow.

One response the survey did not offer, which was identified by several respondents, was the difficulty mentoring or training new or junior employees while people were working remotely. There is no doubt that once employees return to their offices, it will be much easier for junior staff to gain the hands-on experience they need to progress their careers in re/insurance.

Litigation risks

Figure 2: How concerned are you about litigation risk, and the threat of governments forcing re/insurers to provide retrospective cover for pandemic risk in lines such as business interruption?

On the thorny subject of retrospective business interruption coverage, the industry appears to be locked in wait-and-see mode (Figure 2). Nearly threequarters of respondents (73 percent) described themselves as either slightly concerned or somewhat concerned about the possibility of authorities forcing them to pay out on business interruption claims, despite pandemic exclusions.

However, where there were strong feelings about it, they leaned towards concern, with the majority of other respondents (24 percent) saying they were either concerned or very concerned.

The business interruption litigation risks looms large over the re/insurance industry and until that is resolved executives cannot accurately forecast the state of their finances. It is just one of many strands of uncertainty in which they are currently entangled, as bosses wait for signs of an economic recovery.

Figure 3: Is the Bermuda re/insurance industry prepared for the possibility of higher than average losses during this hurricane season?

Given this heightened state of uncertainty it is little surprise that views about the industry’s preparedness for hurricane season showed a high level of divergence (Figure 3). However, no respondent believes the industry is in such dire straits that it will struggle to manage the current hurricane season under any circumstances.

Some executives admitted to feeling nervous about the current hurricane season delivering a series of extreme weather events that cause large insured losses. More than a third of respondents said re/insurers will have a problem if the current hurricane season brings losses in the high end of the normal range. An unusually destructive hurricane season would, by extension, create an even bigger problem.

However, the majority of respondents were relatively sanguine, with a quarter of them saying re/insurers will be fine as long as the hurricane season remains within the normal range, and nearly 40 percent—the largest group of respondents—arguing re/insurers will be able to cope with whatever the weather throws at them.

Figure 4: What does the COVID-19 pandemic mean for the Bermuda re/insurance industry’s climate change agenda?

There were differing views on what COVID-19 means for the re/insurance community’s climate change agenda (Figure 4). Nearly half of respondents saw the two as very separate issues, with the pandemic unlikely to have any impact at all on re/insurers’ ability and appetite to deliver climate-mitigating products to their clients.

Either side of that, however, were very similar numbers of respondents who thought COVID-19 might either increase, or decrease, the focus on climate change. Slightly under a quarter of respondents believe the experience of dealing with this global crisis could sharpen the focus on another global risk that has been discussed, but barely acted on, for years.

Conversely, slightly over a quarter of respondents went the other way, believing that while climate change will remain an issue, businesses and re/insurers will be too focused on the pandemic to maintain the same degree of attention on climate change.

A very small proportion of respondents (2 percent) took this view to the extreme, believing pandemic concerns will crowd out climate change altogether.

Figure 5: Do you expect increased issues around travelling in coming months, and the fear of another pandemic, to make Bermuda a less appealing place to work?

The survey asked readers what COVID-19 means for Bermuda as a re/insurance jurisdiction going forward (Figure 5). Much depends on how the crisis develops in coming months. If the world is able to contain the spread of the virus, or a vaccine or cure is found in the coming months, the impact of the crisis will be smaller, whatever that impact might be.

If the pandemic continues to spread, and proves resistant to efforts to formulate a vaccine or a cure, the impact will be more severe. Taken to the extreme, it could have a profound impact on the way the world lives and works.

Here, again, there was a spread of views. A little over a third of respondents thought that the impact COVID-19 has on Bermuda’s ability to function as a re/insurance hub—whether positive or negative—will be temporary.

Around a fifth of respondents were confident that COVID-19 will have no impact on Bermuda’s role in re/insurance, even in the short term, although a similar number worried it will make it harder to attract people to the Island.

Sixteen percent of respondents feel COVID-19 could end up strengthening Bermuda’s role in the re/insurance community. It is easy to see the logic: in the midst of a contagious outbreak, a relatively sparsely populated island such as Bermuda has advantages over densely populated urban centres such as London and New York.

If the trend towards working from home continues, the need to be in such large urban centres will be reduced, and while many may look to move within their home countries, to more rural areas, others may consider a more fundamental lifestyle change.

Whether this will cause Bermuda’s immigration department to be inundated with visa requests remains to be seen.

Image: / MIA Studio

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Summer 2020

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