As the insurance and reinsurance industry continues to grow, the extensive risk landscape also continues to widen, with major risks stemming from key areas such as climate change and cyber, which according to John Neal, Chief Executive Officer (CEO) of Lloyd’s, means that the industry has to evolve and innovate at a faster rate than it has done historically.
Speaking at S&P’s European Insurance Conference in London, Neal explained how successful innovation across the industry requires collaboration.
“When you think of the global insurance industry there’s a certain way in which we trade in London at Lloyd’s, that’s very much at the heart of what we do. Enjoying relationships with all the different actors that look to mitigate and manage risk,” Neal said.
“And this wide ecosystem that you see around means that we have unusual concentrations of talent in the industry in London, to assess, measure, and ultimately underwrite some of the most complex risks that no single insurer or reinsurer can contemplate on their own.
“And of course we only stay relevant to our customers if we’re looking out at the challenges that they face in the world in the coming decades, and if we have the right product and service solutions that meet their expectations and our sense is that sense of risk or the sense of challenge for business is only going to increase.
“If we look at some of the obvious ones, such as the complexity of supply chains, or if you look at the true impact looking forward to climate, or the rapidly accelerating pace of cyber and data risks before you even get to AI and GenAI, you can just see how extensive the risk landscape will be. And all this means that our industry actually has to evolve and innovate at a faster rate than it perhaps has ever done in history.”
It’s no secret that the re/insurance industry has previously had to adapt and evolve at a fast pace during global events, including the backdrop of COVID-19 which had severe impacts all over the globe, as well as the ongoing Russia and Ukraine war.
Neal explained how its at times like these that he feels the world is at its most unpredictable and fast moving, which ultimately means that the insurance industry has a real responsibility, role and opportunity to stand up particularly in front of its customers and demonstrate why it exists.
He continued: “So unusually the management of risk has become a broad priority. When I think of the discussions that are taking place around the board table, it’s not only about the insurance these days. It is about risk, it is about the opportunity for a company to translate that risk from their balance sheet to an insurer and that’s a combination of the nexus of technological complications, geopolitical complications, and climate, and all three coming at once.”
“I think we do have here in London and at Lloyd’s a superpower to deal with the most deep and complex change. And the ability to do that is because we come together to both syndicate and share risk.”
Furthermore, Neal added that it is critically important that the industry is able to think out around emerging risks and what they actually mean, when the industry has a responsibility as well as to a customer to help solve their problem, but also to investors, to give them a credible return on the capital they’re putting at risk.
“I would argue that if Lloyd’s has been around for 300 or more years, it’s largely because we’ve listened pretty well to our customers,” Neal added.
“When I think back at all the examples, the first burglary policy that was written in Lloyd’s was when a broker came in and asked an underwriter if they could provide the required cover. The underwriter’s response was why not, and broadly, I think the spirit of why not is the evidence over centuries of the way in which insurance operates at its best.
“Yes, of course, we’ve got to man the changing risk landscape and of course it’s ever changing, but we need to look at it through a lens that wants to solve a problem rather than run away from it.
“It’s in our DNA, I think, to provide the right products and to remain responsive to the challenges that are being presented to us.”
