Capacity, almost everyone agrees, is no longer the issue. The question delegates kept returning to at this year’s Singapore International Reinsurance Conference (SIRC) was what to do with it.
From data centres to space risk to structured deals, APAC (re)insurers argued that expertise and closer partnership with cedents, not cheaper cover, will set the winners apart at 1/1 renewals.
More than 4,400 delegates from 88 countries attended the conference this year, according to organisers. This was an increase on last year’s figures, which were around 3,800 delegates from 84 countries.
“SIRC is about convening the best minds in the industry to be in one of the world’s premiere financial hubs in Singapore,” said Emma Loynes, deputy chair of the Singapore Reinsurers Association, during the closing remarks at the conference. Loynes is also Lloyd’s CEO for Asia-Pacific, Middle East and Africa.
She continued: “But I think it’s also really important to look behind those numbers and what they actually represent… They represent the experts that bring their capacity, but most importantly, their capability to provide risk certainty and resilience for the people, communities and businesses around the world. That is the impact – and, some may say magic of what insurance does and what’s inspired the theme for this year’s conference.”
Loynes said the clear takeaway was that, while capital remains important, it is capability that makes insurance markets work for customers. With markets buoyant, she added, now is the time to put that into practice.
“This means understanding the exposure, having access to robust data, making sure the wording and the structure is right, making sure the customer is at the heart of everything, and that when a claim happens, we deliver the best service possible,” said Loynes.
Such sentiments were echoed throughout the conference – and also in conversations that took place outside the panel discussions.
With geopolitics, climate and technology making everything more complex, two key words were on the lips of almost everybody: innovation and collaboration.
The speed of change
Technology is moving faster than underwriters can model it, and geopolitics is redrawing the map of risk almost as quickly. For APAC (re)insurers, the ability to handle specialist risks has shifted from a niche skill to a core requirement. SCOR’s group chief executive Thierry Léger made the point in his opening keynote, arguing that emerging risks are now arriving faster than the industry can build the expertise to price them.
“The particularity of the latest emerging challenges is that they are coming very fast,” he told delegates. “As an industry, we have to adapt to it, build trust, models, capabilities to attract the capacity required.”
AI, for instance, holds vast potential for the industry, yet (re)insurers still struggle to put a price on the risks it creates.
The opportunity and dangers that such transformative technology presents were a theme repeated throughout the four-day event. These new specialty risks are very much at the heart of Lloyd’s latest outreach initiatives across APAC.
“Complexity has always been with us. What is interesting now is the increasing level of complexity we’re seeing,” said Alex Tarantino, managing director and principle officer of HDI Global, on the sidelines of the conference. “The question in the current environment is how the industry navigates the additional pressures of geopolitics, supply chain disruption and the impact of AI. Part of the answer lies in applying our underwriting models and technical expertise to manage those risk exposures.”
Product innovation
Much of this boils down to innovation.
“The industry needs to continue to adapt, evolve and innovate in response to this complexity, as there will be a growing need to develop new solutions for our clients,” said HDI Global’s Tarantino. “Businesses are increasingly trying to allocate new and emerging risks to traditional insurance products, but we’re beginning to see that these products may no longer be fit for purpose, particularly for businesses driven by AI.”
In his keynote, Gianfranco Lot, Swiss Re’s chief underwriting officer for property and casualty, said that existing covers for data centres are being stretched.
“How big is the loss if the data centre goes down? Are the chips insured? How does the depreciation schedule look?” he said. When it comes to data centres, there are many different risks written across both treaty and facultative: property, construction, marine and energy exposures. This makes insurance highly complex.
While AI and data centres are very much at the forefront of everyone’s minds these days, there are plenty of other sectors that could benefit from new product development.
Marine insurance was one area that several delegates mentioned. This is a segment of the insurance market that continues to be buffeted by ongoing geopolitical tension
around the world, and upon which technological developments are unleashing new problems.
Basic cyber cover now comes bundled with many marine policies, which leaves shipping companies reluctant to buy dedicated cyber insurance. That is a mistake, according to Sundeep Khera, head of marine at Beazley, who argues that bundled cover rarely goes far enough when an attack hits. Beazley has been developing products designed to close that gap, combining marine and cyber expertise to cover the risks that traditional policies leave exposed.
Another area of the marine insurance market that is crying out for product innovation is the shipping of chips for AI. As the size of chips has gone down, the value of them has gone up. This means that the value at risk of many such shipments now exceeds the amount that marine insurers are prepared to insure. At the same time, AI chips are becoming an increasing target for criminals. While there have so far been few incidents of shipments at sea being stolen, the greater concern is when the chips arrive in ports that may not always have the best security.
Collaboration
If capability was the conference’s watchword, collaboration was the thread running beneath it.
“Closing protection gaps calls for action between governments, regulators, businesses, communities, and our industry to play our part,” said Loynes in her closing remarks. “We need to combine policy, expertise, and capital to help people adapt, to reduce damage and to help recovery be more quick.”
She added: “Our collective capability will ensure that insurance continues to play a critical role in the societies and economies of tomorrow.”
Almost every conversation that took place in and around the conference touched in some way or another on the need to work together.
Bo Yu, Head of Claims at Markel International, said conflicts in the Gulf, Black Sea and Red Sea is exposing a gap in how war risks claims are handled. War cover typically sits with commercial insurers, and it picks up the vessel’s third party liabilities, such as crew and pollution liabilities, on top of physical damage to the vessel. The P&I clubs, which normally handle those liabilities and are staffed to do so, exclude war and sit only as excess cover above the hull value.
The result, Yu said, is that complex liability claims are landing with insurers that are mainly set up to handle first party damage to ships, while the clubs’ claims expertise sits on the sidelines.
“What we are seeing is that claims arising out of these conflicts are not a one-off. It seems to be ongoing, if not escalating,” he said. “The market has to come up with a way to collaborate together right at the beginning.”
Others made similar points.
Pavlos Spyropoulos, Tokio Marine Kiln’s regional managing director for APAC, said working with rivals is in the DNA of a Lloyd’s syndicate, particularly in lines where individual risks are too large for one carrier to take on alone.
“We do try to work with our friendly competitors where it makes sense, particularly in lines like property where the risks are very large,” he said. This includes cyber, where the firm recently formed a cyber property damage consortium to put more capacity behind existing products.
The real test will be in the January renewals, when brokers push for deeper cuts and the talk of capability meets the pressure of a soft market. SCOR’s Léger had a name for capacity that runs ahead of capability. “We call it in our industry naive capacity,” he said, “and we all know where naive capacity is leading.”
