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

‘Tipping point’ now reached; means rate hikes could endure

Despite plentiful capacity, re/insurers are not covering their cost of capital and a correction is now occurring, says Janet Katz, chief executive, American Agricultural Insurance Company.

The re/insurance industry has reached a tipping point that will see years of pent-up pressure for higher rates finally released, leading to a correction in prices that is likely to prove enduring.

That is the view of Janet Katz, chief executive officer at the re/insurer American Agricultural Insurance Company (AmericanAg).

“In the past, the basic economic principle of supply and demand has traditionally been the main driver of price,” Katz told APCIA Today.

“When capacity goes down, prices go up. An abundance of capacity in our industry has kept prices down in recent years.” 

This dynamic has finally flipped, Katz said.

“We have reached a tipping point, where there is still plenty of capacity, but reinsurers are not covering their cost of capital,” she said.

“There is no capacity contraction, but we cannot continue to write business at current margins.”

Higher prices are likely to endure for some time, Katz argued, especially given that interest rates do not look set to increase any time soon, making it even harder for re/insurers to cover their cost of capital. 

Katz said her one caveat is that capacity remains high, which could prevent rates staying as high for as long as they need to—continuing the trend that led to the extended soft market from which the market is only now emerging. 

However, this is not her base-case scenario. “For now, I think this is more than outweighed by the increases in cat losses, with events such as hurricanes and wildfires trending up and breaking records each year,” she said.

“If losses continue as they have been, I don’t see how rates can slide back any time soon.”

Katz noted the industry had endured four years of extreme losses in nat cat, with 2017 being the biggest year for industry losses on record.

“2020 is looking like it will be another big year, perhaps larger than 2017, depending on COVID-19 and the rest of the year,” she predicted.

“Hurricane Delta is set to make landfall in Louisiana, becoming the 10th named storm to make landfall in the US this year.”

A sneak preview: more exclusive content and interviews inside

Clients need multiple choices

Just one option means no options, says TigerRisk CEO Fox.

Mortgage market resilience

Reinsurers will be reassured by how this sector has fared.

A sneak preview: more exclusive content and interviews inside

Aon-Willis tie will fill innovation gap while solving silo mentality

Aon’s merger with Willis Towers Watson will create a unique company able to bridge the gap between what a traditional broker offers and other service providers, says Eric Andersen, president of Aon.

Aon’s merger with Willis Towers Watson will create a new organisation the likes of which the world has not seen before capable of bridging the gap between traditional brokers, professional services firms and technology providers, Eric Andersen, president and member of the global executive committee, Aon, told APCIA Today.

Andersen said the COVID-19 global pandemic has illustrated more than ever the importance of clients being able to access a joined-up service when it comes to advisers, who can offer a combination of risk transfer services, advice and technology.

“Our combined organisation will defy traditional categorisation,” Andersen said.

“We will be a more capable professional services firm, with better insurance brokerage services, more complete benefit provider capabilities and a better consultancy across a number of areas including health, retirement, investment and human capital.

“What we build together will enable us to have a vital seat at the table, advising clients on issues that have traditionally been left unmanaged due to the gap between traditional brokers, professional services firms and technology providers.”

Andersen added that the focus will be on continuing to evolve based on what clients need.

“Today, many traditional insurance brokers and benefit providers tend to view client relationships through product silos with an emphasis on risk placement.”