Aon precently hosted a panel debate on systemic risk as part of its Virtual Reinsurance Renewal Season fireside chat, to address key areas of its clients needs.
The debate, which was hosted by Eric Andersen, President of Aon included Christa Schwimmer, Senior Executive Manager, Global Clients, Munich Re, Charles Fry, CEO, Acacia Holdings and Sean McGovern, Chief Executive Officer, UK & Lloyd’s, AXA XL.
The participants discussed navigating new forms of volatility, building a resilient workforce, rethinking access to capital, whilst addressing the underserved.
They all agreed that pandemic, cyber and climate change remained the key systemic risks facing re/insurers.
However, Fry urged the industry to look beyond the risk itself and examine the factors driving exposures, such as changes in demographics, geopolitical and socio-economic trends and technology.
Schwimmer added that it was important to understand the exposure first and then interrupt the systemic nature of events where possible.
The panel agreed that the industry had been “extraordinarily resilient” during the COVID-19 pandemic, but that lessons had to be learnt.
“The pandemic taught us that preparedness is critical,” said McGovern, adding that the event was “entirely foreseeable and expected” and had been on government and company risk registers for many years.
Schwimmer agreed: “You can listen to science, because science has reported a lot about climate change and also the frequency and severity of catastrophes. But to listen, to take it up, to really follow – before you feel it – is something we as an industry could become even better at.”
The panellists agreed that re/insurers needed “a seat at the table” when governments and regulators were formulating approaches to risk mitigation, with McGovern stating that the industry had “an awful lot to bring” in helping with risk planning and solutions.
Fry added: “We need to embed that proactive approach to giving advice and really step up to the plate as experts. We need that embedded in the DNA.”
Fry also noted that media stories resulted in people’s perception of risk being at odds with expert opinion and data in key topical issues such as climate change and the pandemic and was a situation the industry needed to address.
“People’s perceptions of risk can actually contribute to the risk becoming more severe, so we as leaders, as experts in our industry, we have got to be at the forefront in terms of raising awareness of risk, but also managing the narrative to a balanced and sensible way,” he said.
Looking into the future, the panel highlighted the importance of clarity and transparency in order to rebuild people’s trust in the industry following the challenges of COVID-19, and that innovative solutions, such as parametric risk transfer, could help to mitigate systemic risk and close the protection gap.