The megatrends of today’s world are driving new and additional risks to economies in all regions, highlighting the necessity and value of re/insurance protection in mitigating the risks and increasing global resilience.
Speaking as part of a panel at the recently held Guernsey Insurance Forum in London, PwC’s Global InsurTech Leader, Jonathan Howe, noted the top five megatrends as natural disasters or environmental issues, technology, changes in society, economic change, and politics.
The audience heard how insurance protection is going to play a vital part in the management of these megatrends, with panel speaker Rowan Douglas, Chief Executive of Capital Science & Policy at re/insurance broker Willis Towers Watson, highlighting the important role re/insurance plays in mitigating natural disasters.
According to Douglas, there’s a 1% chance the world could experience catastrophe losses as high as $1.3 trillion in 2018.
“That is increasing because of growing exposure and the gradual effects of climate change,” said Douglas.
In recent years, global catastrophe losses have been relatively benign, with annual figures often falling below historical averages. However, the third-quarter of this year, which saw hurricanes Harvey, Maria and Irma strike, as well as devastating earthquakes in Mexico, is expected to result in an extremely costly loss year, in terms of natural disasters, ultimately serving as a reminder to the industry that with disasters it’s always a matter of when the next one strikes, and not if.
Furthermore, and as suggested by Douglas, it’s widely believed that climate change is driving up the frequency and severity of events, suggesting potentially higher loss years in the future.
“What will really change (in the sector) is how resilience-related services and transactions are wrapped up and integrated within mainstream (insurance) business. That is the revolution – it’s not about technology, it’s about rethinking how resilience is going to be incorporated into core financial valuation and how that’s going to be transacted and traded,” continued Douglas.
Adding; “And that’s very exciting because it’s our industry, not banking, or even asset management, that sits at the heart of that revolution.”
As mentioned previously, technology was also touted as one of the top megatrends, underlined by the rise of InsurTech and FinTech companies looking to enter the risk transfer value chain and provide increased efficiency and a better consumer experience.
Howe discussed the rise of InsurTechs, stressing the need for different parts of the industry to work together to achieve the best outcome.
“People said there would not be much disruption in insurance and I think that’s right. By far the majority of InsurTech start-ups I see, probably well over 90%, are not trying to be insurance companies end-to-end. These are companies that have some technology and are looking at a very specific part of the insurance value chain, a really small niche, and saying they can do that better and can solve that problem.
“You could build it in-house, but it takes three or four years and the end result is generally disappointing. It’s flexibility at speed and they need each other to move,” said Howe.
