While the world faces a growing array of macro and geopolitical challenges, the pressures these create can also provide opportunities, while some other chances for growth are being left on the table by incumbents, Chris McKeown of Vantage Risk believes.
Chris McKeown, the Chief Executive, Reinsurance, ILS, and Innovation at still relatively young re/insurer Vantage Risk, discussed some of the threats and opportunities facing the reinsurance industry in a recent interview with Reinsurance News.
Speaking with us around the Monte Carlo Rendez-vous 2022 event, McKeown highlighted the way macro-economics and geopolitics are threatening the industry.
“From a parochial stance, the supply chain and labor disruptions particularly mean industry losses are amplified by demand surge (lack of goods), delays, and higher costs,” he explained. “While always important, correcting undervalued ITV becomes a critical activity.”
“Both Reinsurers and Insurers need reliably accurate valuations to ensure adequate claims reserves. Combined, these considerations alone will drive the industry to continue pursuing rate adequacy.”
While on the global stage, “From a macroeconomic standpoint, the world continues to experience interrelated and compounding risks across the environment, economy, politics, and technology. A case in point would be China. The recent heatwave and drought there is the worst recorded by most measures. The areas suffering the most account for nearly half of their rice output. Electricity cuts due to inadequate hydropower are leading to suspended manufacturing. Unemployment there was reportedly near 20% in July.”
“As the second largest global economy, how it responds will shape international monetary policy and in turn, influence the pricing of risk.”
These global threats appear to be growing all the time, while new threats are also emerging closer to home as well.
McKeown continued, “In the US, the interconnectivity of the economy continues to reveal itself in new ways. Conditional probabilities of certain events may change due to shifts in climatology, gaps in infrastructure, and lack of qualified loss adjusters and service contractors.”
“These interdependencies are large scale problems that we are beginning to better understand due to the advent of large data management and increased computational power.”
While the world faces increasingly volatile times, it seems, McKeown feels a fresh re/insurance balance-sheet, such as Vantage’s, has an opportunity to serve its clients and take advantage of the opportunities that come out of uncertainty.
“We’ve had a great build out and worked to optimize our portfolios across 2021 and 2022 with a focus on North America Property Cat and Global Specialty We’re realizing Cat geographic growth now, particularly in the EU, and to some degree in Japan. Also, large national carriers that generally take a “wait-and-see” view of new entrants have seen how we have operated in our first two years, and are approving Vantage for 2023 business. Our ability to write a broader array of Specialty lines will bolster our standing with these larger carriers.”
“We’re looking forward to exploring opportunities to further improve our portfolio though expanded relationships with US nationwide carriers, European insurance companies, specialty entities, as well as with our core portfolio of regional and super regional companies who have supported us from the beginning,” he told Reinsurance News.
Highlighting one of these opportunities, McKeown zeroed in on the geopolitical environment.
He said that, “Specialty reinsurance has already been a fantastic success story for Vantage. Many lines have great data transparency, which excites us as a data-driven, tech-enabled re/insurer. Geopolitical uncertainty, the Russia-Ukraine war and China-Taiwan tension, is putting pressure on disaggregation in the “composite” market.”
“While still too soon to predict what will unfold, we see opportunity in this segment, on either an aggregated or disaggregated basis. Vantage is well poised to support this with more singular capacity.”
Another area Vantage is focusing is on the intangible, so the new value-at-risk being generated by innovation and intellectual property, which McKeown feels some may be over-looking.
“Longer term, intangible asset value continues to be inadequately addressed by our industry. Among S&P 500 companies, 90% of their assets are intangible.”
“The industry is largely leaving this opportunity on the table.”
“We’re actively working with cedants to help them improve their relevancy to insureds that hold considerable intellectual property,” McKeown stated.