The concerning yet still attractive reinsurance marketplace is going through unprecedented change supported by the rise of InsurTech, and the future of the industry will see customers take more control over the evolution of both products and distribution, according to Robert Berkley, President and Chief Executive Officer (CEO) of W.R. Berkley.
Speaking during the firm’s second-quarter 2017 earnings release, W.R. Berkley’s President and CEO highlighted the “concerning” reinsurance marketplace.
“We can’t really offer any great insight into it, other than the benign cat loss environment has allowed people to benefit from that and that has been subsidising the balance of their business,” said Berkley.
The reinsurance market has been under significant pressure for some time, and a real need for increased efficiency across all parts of the risk transfer value chain has come at a time when technology is looking to disrupt and modernise the financial services sector, with insurance and reinsurance being targeted through a flurry of InsurTech start-ups.
Berkley noted the increasing “chatter and buzz” around data and analytics, explaining that to a certain extent, InsurTech has become the “flavour of the day.”
As mentioned earlier, advanced technology that utilises big data, the Internet of Things, and improved analytics capabilities is looking to either partner with established insurers and reinsurer, or in some cases disrupt the value chain alone by the development of more efficient business models and solutions.
“We think all of these tools have great value and we are users of them, and quite frankly, we are investors in some InsurTech opportunities.
“Having said that, for our perspective, when the day is done these are just tools and ultimately how effective they are, how helpful they are, will be determined by the people who are using them and the expertise that they have,” said Berkley.
He continued to note the unprecedented change sweeping through the reinsurance industry, but sought to remind that as an industry both historically and today, re/insurance is there to sell products, and it sells its products to customers in the manner the industry wants to sell them, and distributes it the way the industry wants to distribute it.
However, the future of the marketplace could see the tables turn, ultimately giving the customer more control.
“It is our view that going forward over time, you’re going to see a bit of an evolution, where customers are going to drive more and more what the product is and how it is distributed. And the, if you will, buffer known as regulation, that has kept much of this change from occurring today, is also primed for a degree of change as regulators are becoming more in touch with the needs of society, and looking to be responsive to that,” said Berkley.
It’s an interesting notion, and with technology rapidly advancing and seemingly determined to disrupt and participate in the evolution of the risk transfer industry, it does appear the industry is undergoing change like never before. And with regulators and companies looking to increase customer value in an ever changing risk landscape, a more client-controlled marketplace might not be too far away.
Despite the persistent headwinds impacting the reinsurance sector, W.R. Berkley still views it as an attractive business and remains fully committed to the space.
“Having said that, we also recognise some of the imperfections in the business and we are not going to expose capital in a manner that we don’t think makes sense,” said Berkley.
