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Barnett Waddingham
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European Insurance Forum 2013 - Facing the Future of Risk - Part Two

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On Day two the topic of mergers and restructures was tackled; the panellists predicted that private equity and hedge funds will play a more important role in the insurance industry in the future.  Private finance are interested in insurance companies, intermediaries such as claims administrators and brokers.  They may be the catalyst for transactions to continue to happen.  They highlighted Lloyd’s is an attractive market for them as Lloyd’s have good corporate governance, IT infrastructure and central fund, all of which gives instant access to the US market.

There was an inspirational talk given by Mark Pollock – Bonic Man.  He has overcome his blindness to travel to South Pole, now he has to battle paralysis and hoping to walk again one day.  Mark’s experience in life and how he dealt with it should put us all to shame!  His quoted resonated with us deeply: “Sometimes we choose our challenges, sometimes challenges choose us.  What we decide to do is what we can control.”  He told us to:

  • Be brave - when faced with adversity
  • Be different - do not makes excuses, make it happen
  • Be ambitious - for the future

John Bruton, the president of IFSC Ireland delivered the second day’s keynote address.  He called for the industry to focus on ethics, trust and morality rather than simply rely on regulations.  He also stressed that innovation is essential for growth and supports a single European resolution system for banks.

Another hot topic that rarely goes without being mentioned at seminars in the recent years is generating investment return in a low interest rate environment.   An investment specialist mentioned that liquidity and capital preservation outrank yields when companies rank their investment objectives.   There seems to have a consensus that the slow economic growth will continue and inflation will remain low.  Another specialist pointed out that company should focus on absolute performance rather than benchmarks and should work more closely with their asset managers to manager their downside scenarios.

On a slightly different note, noted the importance of driving efficiency going forward. With premium rates under continued pressure, reserve margins wafer thin and a lack of investment returns to mask weak UW, the focus going forward could well be on driving efficiency from expenses. I wonder what a highly efficient insurance sector might look like..?

How can an insurance forum end without discussing the biggest catastrophic loss in 2012?  It is estimated that Sandy Storm cost the insurance industry approximately $19bn with 1.5m claims.  Despite all the logistic and regulatory issues, the industry has responded well to the situation.  Looking back at history, there were similar storms in the North East region in US in 1815, 1821, 1869, 1893 and 1938.  So can we expect more to come?  Yet it was suggested the current CAT models are not capturing the transitional storms, storm surge and flood elements adequately.  Better understanding of this peril by Government, insurance industry and policyholders are needed.

This concluded the two day conference.  Hope you find our synopsis useful and we look forward to next year!

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