“We wield significant power when it comes to ESG.”
Moses Ojeisekhoba, Swiss Re
Uncertainty is what reinsurers do best
Moses Ojeisekhoba, chief executive officer Reinsurance of Swiss Re, left SIRC’s delegates uplifted by his positive messaging yesterday as he spoke about how the industry could help solve some of society’s biggest systemic problems.
He said one of the biggest challenges would be climate change—but that uncertainty is what the industry does best. “We employ people whose prime role is to figure things out and to make sure that we have the right models in place,” he said. “It’s looking not just at the patterns of the past, but also at those of the current situation, and thinking about what it means and what the right price is for the risk in working with clients.”
He acknowledged that the industry needed to do more around environmental, society, and corporate governance (ESG) factors, but that it has the power to make a real difference.
“We wield significant power when it comes to ESG,” he said. “The insurance companies are significant holders of assets. With that, you can influence what companies do by deciding where you direct your investments.
“If you direct them away from industries that make negative contributions from an ESG standpoint, you help to evolve and make the change that needs to take place. And on the liability side, you can be firm with certain activities that are not good for the environment.”
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A flood of climate change litigation?
“In many instances, governments are the defendants, but corporates have also been drawn into the net.” Lucian McMahon, AIR Worldwide
The worrying possibilities around climate change litigation were discussed by experts at SIRC yesterday, who stressed that it was likely that commercial business interruption contracts would need to be tested in court—and the outcome was far from certain.
Lucian McMahon, AIR Worldwide’s research manager of casualty analytics, noted that while climate change litigation has been a feature in the US for over a decade, cases have now also been filed in Australia, the UK and various EU member states. In many instances, governments are the defendants, but corporates have also been drawn into the net.
This is and should be very worrying for the insurance industry. “Of course, the multi-billion dollar question is to what extent commercial liability policies would respond to these harms,” said McMahon.
He noted that, crucially, if only one case were to succeed, it could open the way for a rush of others.
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Failure is OK: the key to digital transformation
“Digital transformation is not easy, nor can it be done overnight.” SIRC panel
A certainty that new technology will reinvent and revitalise the insurance industry has been a consistent theme through SIRC so far, and was considered in more detail in discussions yesterday.
A panel of experts that included Victor Kuk, head of client markets for P&C reinsurance business in Southeast Asia, India, Korea, Hong Kong and Taiwan for Swiss Re, and Pravina Ladva, the company’s group digital transformation officer, agreed that digital transformation is not easy, nor can it be done overnight.
But they did agree on the idea that it will transform the industry, acknowledging that the companies that get this road to change right, will be the winners in the long term. Culture is key, they noted. Companies that are the most successful at digital transformation have a culture where failure is allowed and not punished.
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Not thick-skinned enough for pandemic risk
“Responding in an agile way is challenging.” Conor Donaldson, GAIP
While “the industry’s skin is not thick enough” to manage pandemic risk, it does have a role to play in helping governments better manage this risk, a panel of experts from The Geneva Association, Chubb, Peak Re and Singapore’s Global-Asia Insurance Partnership (GAIP) agreed yesterday.
Participants agreed that governments must take the lead in the way pandemic risk might be handled and even insured in the future, given the scope, scale and nature of risks—but the insurance industry also has a role to play.
They suggested a potential model for managing this risk might be a government-mandated and insurer-run mandatory coverage scheme. But they also feared voters might resist what would be perceived as a new tax scheme. A government backstop on reinsurance could prove more palatable, they suggested.
“Moving the ship of state is very difficult and responding in an agile way is challenging,” former regulator Conor Donaldson, now with the GAIP, told the panel. Policymakers are naturally looking to leverage insurance industry expertise in pricing, mitigation, prevention and more.
Nobody does behavioural “nudging” quite like insurers, he suggested.
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Image courtesy of shutterstock.com / CKA
Main image: Shutterstock.com / JKboy Jatenipat
