Speaking yesterday at Swiss Re’s London offices, the firm’s Chief Economist Jerome Haegeli, alongside the Head of Insurance Risk Research Dan Ryan, stated that it will take a combination of proactiveness and the deployment of new technologies to narrow the global protection gap.
“More technology is a huge upside to the re/insurance industry because it expands the insurability, it expands the ability to model and access risk pools which before you didn’t want to, because either there was no data or there were too many hazard issues,” Haegeli said.
“With blockchain, for example, you’ll be better aided to access risk pools and provide private capital market solutions to narrow the gap. And that should be our goal.”
The widening protection gap is a persistent feature of the re/insurance landscape. Last month the United Nations Economic and Social Commission for Asia and the Pacific predicted that economic losses from natural disasters and weather catastrophes will reach $160 billion per year by 2030, with only 8% of losses likely to be covered by insurance.
Narrowing this gap is particularly important for ensuring economic stability in the Asia Pacific region, where the vast majority of economic losses are absorbed by the public sector across different levels of sovereignty.
However, as the use of new, less thoroughly-understood technology increases, the re/insurance industry must understand and account for the new challenges and magnified risk this will bring.
“The big challenge with cyber is the data, and better understanding its key components” stated Ryan.
As well as overt attacks, there’s also the challenge of ‘silent cyber’, which Ryan said will require a “deeper understanding of the supply chain and the ways in which companies are interconnected” to overcome.
Silent cyber can occur when other types of re/insurance policies fail to explicitly exclude cyber risks, which could result in an accumulation of cyber losses within other policies.
Ryan called for a better understanding of infrastructure and the ways in which it is vulnerable to either the breakdown or exploitation of data, as well as improving the understanding of “data trust”.
“Clearly, in a supply chain situation, you as a supplier may be very uncomfortable providing your data to a third party.”
“Finding ways to construct anonymous databases where information gives visibility to where to supply chains lie, as opposed to the companies involved, will be important,” added Ryan.
