Welcome to APCIA Today

To overcome the challenges posed by COVID-19, the APCIA Annual Meeting is going ahead this week as a virtual event.

With an agenda titled “Defining our Future” the event will deliver a packed agenda of keynote speakers and panel discussions comprising senior industry leaders across two days: Monday October 12 and Tuesday October 13.

As such, we are publishing our annual conference newsletter, APCIA Today, also in a virtual format.

We have again conducted interviews with senior executives ahead of the meeting, and we will attend the virtual events and ensure our

readers have their fingers on the pulse of the industry at this critical and unprecedented time.

We hope you find the content in the following pages as useful and insightful as you have always done.

We miss seeing the industry face to face but we will still do what we have always done: report on the most important events, news stories, opinions and debates to keep our readers informed and ahead of the game as they make decisions

Wyn Jenkins, managing editor, Intelligent Insurer

A sneak preview: more exclusive content and interviews inside

‘Fear factor’ will drive significant rate hikes

An accumulation of losses combined with the dynamics of supply and demand will determine rate increases to a large extent, but fear will also play an important role—as it has done in previous hard markets, says Mark Vaughan, deputy head of treaty at Beazley.

Vaughan told APCIA Today that fear will be an important factor as the market grapples with negotiations around price in this renewal, which is one of the most extraordinary in the market’s history because of the restrictions around face-to-face contact due to COVID-19.

“The fear factor is always there to some extent. In a hard market, people talk about supply and demand, but sentiment and the fear of the unknown are always present as well—and that will play on people’s minds,” he said.

“It will have an important role in determining to what extent new capital enters the market. While it is moving in, it is happening in a very orderly way and will be controlled by established and sensible companies.”

Vaughan lists the multiple natural catastrophes that the market has endured in recent years. These include an increasing number of hurricanes, very high levels of tornados and severe wildfires, which have triggered significant losses for four years in a row. And that is before the uncertainty surrounding COVID-19-related losses is factored in.

He said there is uncertainty around the prevalence of natural catastrophes and the extent this may be linked to climate change.

“There is fear in the market around what is happening with climate change, such has been the frequency of events,” he said.

A good comparison is what happened in 2006, following a very bad hurricane season in 2005 when 27 tropical storms or cyclones were recorded, including Hurricane Katrina, Vaughan recalled.

That year was notable because the sheer number of storms meant the naming convention (the storms of the season are named in alphabetical order) was exhausted and the last six of the season had to use letters of the Greek alphabet.

“As a result, we saw fear in 2006. People had capacity but were wary of using it because of the uncertainty around the frequency of events the year before,” Vaughan said.

“Fast-forward to 2020 and we have already started using the Greek alphabet and we are only in early October. Climate change is very much front of people’s minds due to this and that will play into what happens with rates.”

A sneak preview: more exclusive content and interviews inside

Lessons learned from COVID-19

A panel of experts debate how the industry must react and change as a result of the pandemic.

Proposing pandemic solutions

Three associations including APCIA and NAMIC outline how pandemic protection might work.

A sneak preview: more exclusive content and interviews inside

P&C industry underestimated COVID-19 exposure, but still has important role

The scale of the risks associated with a pandemic requires public-private partnership, says Keith Wolfe, president of US P&C at Swiss Re.

Wolfe added, however, that most business interruption (BI) claims will not be covered due to a lack of property damage, which triggered most covers, or virus exclusions, which are present in many contracts in the market.

“The good news, from a COVID-19 standpoint, is that there’s a much higher level of contract clarity around what is and isn’t covered related to infectious disease in P&C contracts,” he explained.

“Because of that we have a lot more certainty about what the actual losses will be to industry.”

Wolfe was speaking during a deep-dive interview held on Intelligent Insurer’s Re/insurance Lounge, an online platform where interviews and panel discussions are held live on a weekly basis and content is available on demand at any time to members.

In the US, if you were to pay claims across every BI policy—although, as mentioned most are excluded or haven’t triggered coverage—you would exhaust the capital base of the re/insurance industry in approximately three months, warned Wolfe.