During the annual meeting of the reinsurance industry in Monte-Carlo, Reinsurance News met with the Chief Executive Officer (CEO) of SCOR Global P&C, Victor Peignet, to discuss some burning industry topics.
Regarding the potential but very uncertain impact of hurricane Irma, Peignet underlined how a fragmented market made it difficult to understand how the industry will react, but did say he expects it to be a test for the alternative space.
In light of widespread uncertainty surrounding both the economic and insured loss from the event, Reinsurance News was eager to get Peignet’s thoughts on other elements of the current, challenging reinsurance landscape, including the global protection gap (disparity between economic and insured losses post-event).
“More countries are realising that, without insurance, their strategic risks are much higher and their chances of recovery are much, much lower.
“When there is genuine recognition that certain uninsured risks are insurable and should be insured and from the time these risks become insured, the number of accidents reduce at the beginning you don’t know how to price new lines of business, then somewhere along the line there is a stabilisation as data are accumulated and exploited – you see that for basic lines of business as well as more complex specialist lines of business.
“But the main added value of insurance is still in risk management and the reduction of losses,” said Peignet.
A big part of the protection gap debates’ across the risk transfer industry often involves resilience, with global organisations, such as the World Bank, calling for increased resilience in order to fight the growing frequency and severity of natural catastrophe and climate-related events.
Peignet, underlined the importance of resilience; “What sort of urbanization do you want, what kind of risk management do you want when you develop cities and real estate and incentivise the population to move to certain areas? A lot of cities are close to the sea and are “sinking”, due to subsidence, which increases the risk of flood.
“This happens where you’ve got a concentration of people, concentration of buildings and depletion of the water table, resulting in subsidence and cities falling below sea level.This gets further worsened when the drainage systems aren’t engineered, developed and maintained.
“There are already many studies and concerns around resilience and there will be many more. Insurers and reinsurers can get involved in this. We have a huge amount of data and knowledge – that’s where the opportunity is.”
Moving away from resilience and underinsurance, Reinsurance News talked with Peignet about changing relationships in the industry, and what this might mean for certain parts of the value chain.
“The conceptual and intellectual capital part of the relationship is increasing, the business is changing. It’s more about what you can bring to the table. [Broker facilities] could be one way to reduce the frictional cost, so conceptually you can understand how trading on a risk basis, for a certain number and type of risks that are relatively standard, was a luxury of the past and something that is going to disappear.
“But in a soft market where the distribution of the business is changing, the underwriter must beware and stay in control,” he said.
To finish, Peignet offered some thoughts on the UK’s vote to leave the European Union (EU).
“Brexit will increase complexities for the business, and the frictional costs are going to rise. So I don’t think it’s beneficial for anyone. It’s not impossible to operate in the new format – not that we know the new format yet – so the Plan B option is to open subsidiaries in Europe. You cannot wait until the last minute to prepare – so you prepare for the worst and hope that in the meantime during the negotiations the outcome is not actually going to be the worst possible one.
“If you compare the level of sophistication of our business today to what it was five years ago, a lot of progress has been made. Reinsurance has become absolutely strategic for many more and most clients.”