Value of reinsurance is under-reported
As Hurricane Irma continues to move
through Florida, the Association of
Bermuda Insurers and Reinsurers (ABIR) is keen
to stress that the impact of the hurricane on the
end consumer of insurance must not be forgotten.
“Something that is very under-reported
is the value proposition of reinsurance,” said
Brad Kading, president and executive director
of ABIR. “All we hear people talking about is
the impact of events on reinsurance markets,
when the real question ought to be what is the
impact on and benefits for consumers?”
Kading said that reinsurance means that
claims are paid quickly and cedants are able to
trade forward in spite of catastrophic losses. “That
is the reinsurance value proposition—it provides
liquidity, stability and resilience in markets.
Harvey demonstrated that well and Irma will also
demonstrate it, but it should be better reported.”
He stressed that policymakers don’t care
about the impact of losses on reinsurers—
that’s an investor story, not a consumer story.
Instead, the industry needs to highlight the
value of reinsurance in providing liquidity
and stability, and in making consumer markets
more competitive, with prices lower than they
otherwise would be. The industry can also
help close the protection gap and increase the
purchase of private flood insurance in the US.
“The investor focus is wrong. The story
needs to be turned around to tell the beneficial
impact of reinsurance on consumer insurance
markets. There’s a huge disconnect with
the local population—they don’t care that
a reinsurer is not going to meet its return on
equity target or report a loss,” Kading said.
“What they care about is ‘how do I get the
roof repaired on my house?’. The value of
reinsurance is that the claims do get paid, even
though there’s been a disaster.”
He notes that, thanks to its reinsurance
coverage, the US National Flood Insurance
Program (NFIP) will receive a cheque for $1
billion for Harvey.
“Due to the first ever NFIP reinsurance
programme we can demonstrate the value
of that reinsurance product. The payment
provides liquidity and saves taxpayers from a
larger burden,” Kading said.
He also pointed to the value of parametric
products, where a trigger point results in
a payment. The Caribbean Catastrophe
Risk Insurance Facility Segregated Portfolio
Company will pay the government of Barbuda
to aid in its recovery from Irma, Kading noted.
“That is a speedy payment and an important
contribution to meet humanitarian and
infrastructure needs. It’s a great example of a
successful public-private partnership,” he said. n
Swiss Re sees growing collaboration opportunities with insurers
Swiss Re sees growing opportunities to
collaborate with primary insurers in the
development of innovative products, growing its
know-how and potentially gaining new business.
The opportunity to develop new products
is driven by pressure to reduce costs in the
insurance space but also by technological
innovation, said Eric Schuh, Swiss Re global
head of P&C solutions.
As a result of the development of a new
product, Swiss Re may benefit from the
consequential reinsurance cover need from the
insurer, but the projects are seen as part of the
reinsurer’s client relationship strategy and its
aim to grow its know-how.
“It is similar to what we have been seeing for
several years in the life market, where reinsurers
and insurers develop products and models and
target new markets together while sharing the
resulting business,” Schuh said.
“In the P&C market this has not been so
much the case, but it is now becoming more
popular,” he added.
The development of new products is also
driven by a soft market where insurers are
looking for opportunities to grow.
Swiss Re has created a unit for P&C
solutions to develop this area, also following
client requests for collaboration. The trend
towards innovative solutions in the P&C space
has gained traction in the motor business first,
with the introduction of telematics. But the
potential of new applications is growing fast.
It ranges from statistical analysis and textmining
solutions to gain insight into risks, to
developing parametric solutions for real-time
reporting or automatic risk placement for
applications providing facultative reinsurance
cover in real time.
A recent example is Swiss Re’s partnership
with Chubb to underwrite a new insurance cover
for airline travellers. The new offering will cover
the additional costs and inconvenience travellers
face due to flight cancellations and delays.
The claims will be validated in real time
using data from FlightStats, a provider of
real-time global flight data to consumers and
the travel industry, and paid directly into the
customer’s PayPal or bank account, or credited
to their debit or credit card, within an hour, or
at the latest within 72 hours of arriving at their
destination, the company claims.
“Today it is possible to address risks in a more
detailed and agile way,” Schuh concluded. n
16 | MONTE CARLO TODAY | DAY 3: Tuesday September 12 2017 www.intelligentinsurer.com | www.bermudareinsurancemagazine.com