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17 August 2015 Reinsurance

CEO forum: innovation

Amid challenging market conditions, many companies are looking to innovate and target new product lines. What specifically are you doing on this front?

Amer Ahmed, CEO, Allianz Re: “We live in an ever-changing and more complex world. Risks faced by individuals and corporations are evolving and our industry is well equipped to help them manage their risks. So, innovation is essential for us to fulfil our customers’ needs and expectations.

We see innovations happening in risk coverages, products and distribution approaches—these require us to apply our risk management capabilities, use technology advances and bring creativity.

Eric Andersen, CEO, Aon Benfield: “Given the amount of capital in the industry today, innovation is definitely key, bringing new products to market that align to evolving needs and utilise excess capacity. In this regard, the cyber space and US mortgage market space are definitely areas we continue to target, as is the solicitors professional indemnity sector, private aviation sector, and governmental sectors.

By operating as a unified organisation, when one of our team works with a client to innovate a new product, they can draw on the distribution capabilities of Aon Risk Solutions, and combine them with the actuarial expertise and reinsurance support of Aon Benfield, as well as capabilities from Aon Hewitt where necessary, to quickly bring the product to market, utilising capacity and generating income for insurers and reinsurers in the process.

We are also innovating in terms of alternative capital, bringing ILS solutions to clients comprising new trigger mechanisms and structures, and denominated in a wider range of currencies. We launched our proprietary CATstream product in 2014, which allows cat bonds to be brought to market in better than half the time of the traditional cat bond solution.”

Dr Arno Junke, CEO, Deutsche Rück: “On basis of direct relationships with our clients we tend to get involved at an early stage in the product development process. Consequently, Deutsche Rück strives to assist and accompany market developments from the outset and integrate reinsurance solutions with the product development where it seems fit.

Currently, new features of disability insurance or the insurability of cyber risks are under scope. Besides that there is a constant refinement process of insurance coverages in all lines of business, but with less spectacular appeal than broker-driven market revolutions.”

Nick Frankland, CEO, Guy Carpenter, EMEA operations: “A reinsurance broker has to innovate to grow, ever more so in a market of diminishing premiums and reluctant value recognition. We spend a huge amount of time developing new reinsurance structures and new catastrophe models to support our core business, and as much time again on exploring solutions for new products and emerging exposures.

Beyond this we are continuously exploring ways of improving and radicalising historic distribution systems and data analysis. Perhaps more than anything, however, we are looking to a future in which we want to reinvent the reinsurance broking model to aspire towards a fully integrated advisory and placement service that can support the entire needs of the insurance industry: from reinsurance broking, through alternative capital access, capital optimisation and M&A advice, to reserving and underwriting model input, and investment, tax and financial consultancy.

All of these factors contribute to our clients’ success and as such it is incumbent upon us to expand our expertise to match their all-round enterprise needs.”

Torsten Jeworrek, CEO, reinsurance, Munich Re : “The crucial question is whether we as an industry—insurers and reinsurers—are capable of developing new products that suit our clients’ needs and their clients’ needs better or more comprehensively than in the past.

Munich Re is devising innovative coverage concepts that go beyond the scope of traditional reinsurance and, to an increasing extent, also beyond the conventional boundaries of insurability. Thus, for example, we cover performance guarantees for solar modules and offer coverage for the effects of weather fluctuations on companies’ financial positions.

The expansion of digital networking and the rapid rate at which hardware and software are evolving is opening up significant business avenues, for instance in the area of non-damage business interruption insurance or cyber risk coverage. Our experts have been working for many years on cyber risks and enhanced cover options.

Munich Re now offers a broad spectrum of reinsurance solutions in this field and is also able to cover accumulation perils such as virus-related losses. Another example of innovations introduced by Munich Re is a cover concept for reputation risks and the new launch-plus-life cover for the entire useful life of satellites.”

Ulrich Wallin, CEO, Hannover Re: “In 2009 we set up Business Opportunity Management. Within this unit, we work on new products and new ways of writing reinsurance and that has gained some traction, so some of the business that we write now hasn’t been written in that form in the past—and that will continue to be part of our business.

However, it’s important to understand that in the future, the majority of our earnings will come from the traditional reinsurance business, therefore we should not take our eye off the ball and forget to be competitive in this space because we have all these great new ideas. We will continue to see new evolving products and relationships as we always have, but that does not mean that there is no need to stay competitive.”

Ingrid Carlou, CEO, Patria Re: “Our angle is a little bit different, we are not hoping to survive the challenge but rising to it. Challenging conditions in the market are transforming the sophistication of Latin America, and are increasing the size of the pie. On the one hand younger generations of consumers are demanding a new approach to the solutions we offer. The demand is both challenging and innovative in itself and it is questioning the products as much as the producers and the distributions channels.

In the midst of the world crisis, Latin America with all its problems and social complications, has remained a very fresh and vital community. For centuries now, we have made a fiesta of despair and we have not forgotten to laugh at ourselves and others in the face of every crisis or every success.

On the other hand, local and regional insurance companies are waking up to the needs of their clients and to the offer that international competitors are bringing to the markets. If they can get the support to customise these new products and services their reaction will be in our view much more effective than the heavy tread of very large insurance companies.

This vitality is giving the challenging conditions a rather dynamic and positive trend to the Latin American market. For us it means that today more than ever before, it is fundamental to funnel ideas and value-added product and services into the region, and cater them to the specific and topical needs of our business partners.

We have worked very actively on this, and have established important strategic alliances that have allowed us to build carefully and expertly new lines of business we were not offering before. Good communication with the market and talent are the real challenges.”

Denis Kessler, CEO, SCOR: “We are dedicating more and more time to use technological developments to invent new products and to change the way we handle claims. We have entered an ‘era of sensors’ that enable us to monitor risk factors in real time. In terms of prevention, fraud detection and claims handling, the implications are far-reaching for both life and P&C re/insurance.

The leading reinsurers will definitely be those who decide to invest in technological developments. SCOR already uses some cutting-edge tools, such as the Cat Platform for P&C and Velogica on the life side, and its efforts in this direction continue tirelessly.”

Michel Liès, CEO, Swiss Re: “We look at innovating the access to risks as well as creating new product innovations. With regard to improving access to insurance products there has been a good start, but we must do more as an industry if we want to make progress on our goal to bring the financial protection of insurance to as many people as possible.

If we look around, there are excellent examples of how our industry is innovative and keeping up with the pace of technological progress to reach that goal. Think about the amazing leaps forward we’ve made in integrating satellite weather data into agricultural products or the use of mobile and digital distribution strategies to reach different geographies in Africa.

Or consider the role we play in making cyber risks more insurable. Cyber insurance has grown out of recognition that both cyber crime and data privacy rank among the most worrying risks faced by organisations today. So far the insurance industry considers cyber crime as borderline insurable, quite similar to terrorism. To be able to step up to the challenge of making cyber risk more insurable, we need to understand the risk of aggregation (be it from prolonged service interruption following a cyber event, or widespread data privacy breaches) and be able to distinguish between random events versus targeted cyber terrorism or even government-sponsored attacks.

However, to stay relevant and remain competitive in the long term the question is the same for all players: how do you add value to your client for the money they are willing to pay? At Swiss Re we’re certainly benefiting from our diversified model, which goes beyond just reinsurance capacity and also brings knowledge, strategic advice, product development, underwriting and claims support.”

John Cavanagh, global CEO, Willis Re: “New product innovation is a cornerstone of Willis Re’s business and a fundamental feature of our sales pipeline activities. We are constantly in search of new product lines and innovations. The recent launch of our new systemic casualty cat facility, which provides the broadest protection available for insurers across the market for casualty catastrophe risk, is one such example.”

Click here to read part four on market outlook

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