Speaking recently at the Geneva Association’s 50th Summit in Zurich, Switzerland, Jad Ariss, Managing Director, explained in his opening remarks that although insurance has grown in relevance, insurability is being increasingly challenged as the risk landscape evolves.
“One could argue, valuably, that insurance is more relevant than ever. Insurance protects people and businesses. Every year, in the insurance industry, companies pay more than $5 trillion in claims and benefits to policyholders,” said Ariss.
This is especially notable in the life insurance segment, where insurers pay every year $2 billion in retirement benefits and provide old age security to retired people, continued Ariss.
Ariss explained further that there’s not only the financial aspect of insurance that makes it relevant, there’s also the fact that insurance brings peace of mind to people who can envisage the financial consequences of an unfortunate event in a more serene way.
Overall, he explained, insurance strengthens resilience at an individual level, at a business level, and at a societal level.
“So, insurance is more relevant than ever. However, there’s a hic, which is that insurability is increasingly being challenged,” said Ariss.
Expanding on this, Ariss provided some examples, starting with COVID-19. “Pandemic risk, we have all in mind the debate that arose around the insurability of business interruption at the beginning of the pandemic. Global losses generated by the pandemic in 2020 alone amounted to $4.5 trillion, an IMF estimate.
“Well, the premiums of the P&C insurance industry amounted that year to $1.6 trillion. So, it would have taken three years of insurance premiums, of all the insurance premiums of the P&C industry to make up for that.
“Climate Risk, again, challenges insurability. With the increase in frequency and severity of climate events, we are seeing that it is more and more difficult to have insurance available or affordable.
“Finally, cyber risk. A major cyber event has the potential to impact all businesses globally or many businesses globally at the same time, especially if it hits critical infrastructure,” said Ariss.
“So yes, while insurers continue to play their role, their societal role, insurability is being increasingly challenged. And so, insurers are adapting, they are broadening their value proposition in this context,” he added.
