COVID-19 is comparable to 9/11 in the way it will cause widespread multi-class rate hardening in the re/insurance market and drive an increased focus on the finer details of policies and exposures, Jon Sullivan, deputy group chief underwriting officer for international specialty insurance and reinsurance group Brit, told Monte Carlo Today.
“Everyone is learning from the way it has spread so rapidly and had effects across multiple classes,” he said. “It’s brought a focus into areas we hadn’t looked at before and is clearly going to harden a market that has had a challenging couple of years.
“You see people comparing it to both 9/11 and Hurricane Katrina. Katrina was a fairly straightforward major cat loss, although the ensuing floods were a complication, but 9/11 was a multi-class loss nobody foresaw, and what we have here is a similar event: there is consequently a lot more focus on price adequacy across the whole portfolio.”
He added that COVID-19 has prompted close consideration of policy wordings and exclusions.
“People are going to be focusing on the nuts and bolts of the policies they are selling and their exposures,” Sullivan said.
Meanwhile, COVID-19 will also prompt deeper thinking about cyber.
“That is a multi-class interconnected peril where we are yet to see a major loss, and COVID-19 has made us realise how close we are to people on the other side of the globe,” he said.
“It makes you consider what would happen if the ATMs or point of sale machines stopped working.”
A stable base
Looking to the future, he sees plenty for Brit to be excited about, with its Fairfax Financial Holdings parentage giving it a stable base going into a tough market.
“We haven’t lost focus on what could we do next and what could we do better,” he said.
“Brit’s main syndicate, 2987, remains the mothership of the business, while Syndicate 2988, its surplus line vehicle, is growing.
“The insurance-linked securities vehicle, Sussex Capital, will also grow into 2021 and Brit’s algorithmic follow-only syndicate, Ki, is set to launch in 2021.
“We are hoping to build on the work we are doing with Ki, because we expect to see much more focus around the lead/follow model, while the power of the data we have captured can help create a much more efficient product for the end customer—it is a very exciting time for us,” he said.
“The Lloyd’s environment is going to see quite a lot of change, and I imagine we will have fewer syndicates in a year’s time.
“Outside of that there’s some discussion around startups; it will be interesting to see where that goes and what model they take.”
Sullivan added that capital-raising continues to be an important theme.
“I expect that to continue until year end and I think quite a bit of that money is watching the Weather Channel now to see what is going to happen,” he concluded.
Main image: shutterstock.com / Corona Borealis Studio